What Can Industrial Policy Do? Evidence from Singapore

• Published in: The Review of Austrian economics Vol. 37; no. 1; pp. 1 - 34
• Main Author: Cheang, Bryan
• Format: Journal Article
• Language: English
• Published: New York Springer US 01-03-2024; Springer Nature B.V
• Subjects: 20th century; Capitalism; Crowding; Economic development; Economic planning; Economics; Economics and Finance; Entrepreneurs; Entrepreneurship; History of Economic Thought/Methodology; Human capital; Industrial policy; Innovations; Knowledge; Neoliberalism; Political economy; Political Science; Productivity; Public Finance; State capitalism; Singapore; developmental state; industrial policy; market process; knowledge problem
• ISSN: 0889-3047; 1573-7128
• DOI: 10.1007/s11138-022-00589-6

This article explores the limits of central industrial planning through a case study of Singapore. While previous Austrian scholars have argued that successful industrial planning is impossible, and that its successes (if any) are limited to the resolution of technical problems, the positive economic record of Singapore under the auspices of its developmental state capitalism poses a strong challenge to these market-oriented perspectives.
In response, I present a modest position. I concede that Singapore’s industrial policy has to some extent contributed to genuine economic development but insist that its state-heavy approach has nonetheless hampered the market’s entrepreneurial discovery by stifling local entrepreneurial talent and crowding out local small-medium enterprises. The top-down model has also limited the economy’s adaptive potential. I draw from productivity, entrepreneurship, and innovation data to make my case and conclude that Singapore’s experience with its developmental state model comes with a significant cost, notwithstanding its impressive achievements.