The Cold War ended in spectacular fashion. Two great ideological powers went head-to-head with different systems of government, and one of them achieved such a clear victory that the other shrugged and said “yeah, we suck, I guess you guys were right.” There’s been nothing like this I can think of in human history.

Communism failed, yet people still don’t want to accept that markets are superior to central planning, so some scaled back their claims and began arguing that what nations needed was something called “industrial policy.” The government doesn’t have to control resources directly, but rather it must take an active role in deciding what it is worth investing in and the kinds of products it wants to manufacture. The state must control capital, as setting up a well-functioning legal system, solving narrow coordination problems, and otherwise leaving things to the market is insufficient.

I previously told you not to talk about race and IQ. Here, I’m going to talk about nations and human capital. With that bit of cover, plus some data analysis, maybe we can scare away the ethnonationalists. One should only make arguments like this if they’re necessary, and here it is because supposed East Asian success is basically the last argument for central planning. Ironically, ethnonationalists seem to love the idea of industrial policy, and are impressed with China, even though it is a very poor country relative to national IQ, a concept they supposedly believe in. This is partly because they’re authoritarians. But other types of people also think that East Asian success is something that needs to be explained by policy, and it is important to refute this idea.

The East Asian “Miracle”

The success of East Asia is basically the number one story in global economics since 1945. After the end of World War II and most of the colonized world achieved independence, there was hope that new nations would catch up to the West. That generally did not happen, except for Israel, a few oil-rich Gulf countries, and a handful of states in East Asia, namely Singapore, Japan, Taiwan, and South Korea, with China appearing to be on a similar path. For the most part, the countries that started out rich stayed rich, and the countries that started out poor have stayed poor. This has had economists and intellectuals more generally looking around for answers as to why this is. ...