What Can Industrial Policy Do? Evidence from Singapore
Author: Bryan Cheang
Published in Review of Austrian Economic (2022)
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.