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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 Drawing on new data that allow us to examine disaggregated trade data as if they are historical documents, we find clear evidence that pull factors relating to the organization of intermediary demand and the demand responsiveness of Asian manufacturers must be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. [ABSTRACT FROM AUTHOR]

In his review of the book Trust: The Social Virtues and the Creation of Prosperity, by Francis Fukuyama, Robert Solow makes the following remarkably candid comment: … I, for various reasons, would like him to be right. Academic economics likes to pretend that economic behavior is pretty much the same, always and everywhere, almost uninfluenced by socially conditioned perceptions and norms. If Fukuyama's thesis could be proved to be right, it might help to loosen up the profession's view in other contexts as well. Unfortunately, the book does not meet Solow's criterion of proof, and he concludes: I believe that the sorts of things that Fukuyama wants to talk about are more important than my colleagues in economics are willing to admit. I would rather they are talked about imprecisely than not discussed at all. But imprecision is not a virtue, and “for example” is not an argument. To convince economists that organizational structure matters, it is necessary to point to objective measures of economic performance that are affected. We have argued at length that the business groups in South Korea and Taiwan are different, and that these differences are rooted in the exercise of authority and market power in the two countries. We have also shown that the predictions of the authority/market power model – in terms of the size, vertical integration, and horizontal diversification of business groups – match up remarkably well with contrasting structure of the groups in South Korea and Taiwan: this was our first test of the model, in Chapter 4. [ABSTRACT FROM AUTHOR]