In 1993, the World Bank published a report on a remarkable development story.

East Asia's post-war growth — Japan, South Korea, Taiwan, Hong Kong and their neighbours — had lifted millions out of poverty in a generation. The report documented the influence of export subsidies, state-directed credit, land reform, and government-business dialogue. But the bank, constrained by the Washington Consensus of the time, underplayed the industrial policies that were at the heart of this miracle.

Nancy Birdsall was head of the department that produced the report. In this week's VoxDev Talk, she looks back, talking to Tim Phillips about whether this stance affected policy in other developing countries.

Birdsall tells Tim Phillips how the report came to exist at all — financed by the Japanese government as a deliberate strategy to expose the bank's economists to a success story their prevailing framework couldn't explain.

With industrial policy back at the centre of economic debate, Birdsall's new article in the Journal of Economic Perspectives asks whether the bank missed its moment to embed those lessons into its operational work.

The research behind this episode:

Birdsall, Nancy. 2025. "The World Bank's East Asian Miracle: Too Much a Product of Its Time?" Journal of Economic Perspectives 39(4): 127–48. A free download is available at the Center for Global Development.

To cite this episode:

Phillips, Tim, and Nancy Birdsall. 2026. "The World Bank's East Asian Miracle." VoxDev Talk (podcast). [Episode URL].

Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.

About Nancy Birdsall

Nancy Birdsall is president emerita of the Center for Global Development, which she co-founded in 2001. She was previously executive vice president of the Inter-American Development Bank and, before that, director of the Policy Research Department at the World Bank, where she oversaw the department responsible for the East Asian Miracle report. Her research spans development finance, inequality, economic growth and the role of multilateral institutions in the global economy.

Research cited in this episode

The East Asian Miracle (World Bank, 1993). A 400-page study of the economic performance of eight high-performing Asian economies — Japan, South Korea, Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Thailand — covering the period 1965 to 1990. Commissioned with Japanese government funding, the report documented both market fundamentals and a range of active state policies; its handling of industrial policy was carefully hedged to remain within the bounds of what the bank's dominant Washington Consensus framework could accept. The full report is available from the World Bank Open Knowledge Repository.

The Washington Consensus. A term coined by economist John Williamson in 1989 to describe the package of macroeconomic and structural reforms — fiscal discipline, trade liberalisation, privatisation, deregulation and market-determined prices — that the IMF, World Bank and US Treasury broadly promoted as the framework for development in the late 1980s and 1990s. The consensus was dominant inside the bank during the period the East Asian Miracle report was written; countries following activist state policies did not fit its categories easily.

MITI (Japan's Ministry of International Trade and Industry). The Japanese government body responsible for coordinating industrial and trade policy during Japan's post-war growth period, including the direction of credit, protection of infant industries and promotion of heavy manufacturing exports. MITI was widely known inside the bank, but its role in Japan's development was not systematically studied or incorporated into the bank's policy advice until the East Asian Miracle report. It was abolished and reorganised as the Ministry of Economy, Trade and Industry (METI) in 2001.

Performance-based credit subsidies. A mechanism used across several East Asian economies in which exporters could access subsidised credit conditional on demonstrating actual export orders. The conditionality — credit only if you are already performing — was central to why the policy worked: it rewarded productive firms and withdrew support from those that failed to deliver. The East Asian Miracle report described this approach in detail without classifying it as industrial policy.

Japan's postal savings system. A government-run savings scheme that channelled household deposits through post offices into state-directed investment, providing below-market returns to savers while funding subsidised credit to targeted sectors. Birdsall notes it as a mechanism worth studying for developing countries seeking to finance industrial support without relying on private capital markets.

Indonesia and the airplane sector. The Indonesian government under Suharto sought to develop a domestic aerospace industry, with state subsidies to Industri Pesawat Terbang Nusantara (IPTN). The World Bank's East Asia regional department, which managed the bank's lending relationship with Indonesia, was concerned that the East Asian Miracle report might be read as endorsing this approach. Their pressure to limit the report's treatment of industrial policy is the episode's opening anecdote — and the source of what is possibly the best line in the show.

IDB report on public-private dialogue in Latin America. Birdsall references work by the Inter-American Development Bank on the conditions under which structured dialogue between government bureaucrats and private-sector firms can support industrial policy; she notes that access at the highest levels of government — including the president — appears to be a factor in whether such dialogues produce results.

More VoxDev Talks on this topic

Industrial policy for economic development, Dani Rodrik on the evidence for active state roles in directing investment and exports, and the institutional prerequisites for making them work.

The future of the World Bank: Why knowledge is power, Penny Goldberg on the bank's role as a producer and broker of development knowledge, and how that function has evolved since the Washington Consensus era.

Related reading on VoxDev

Modern industrial policy: The Asian miracles' blueprint, a VoxDev Talk examining how the principles behind East Asian industrial success — performance conditionality, export orientation, technology learning — can be translated into policy frameworks for today's developing economies.

Where are we in the economics of industrial policies?, what three decades of research have established about when and why industrial policy works, and what conditions determine whether government intervention helps or hinders.

Implementing industrial policy effectively: Lessons from shipbuilding in China, how policy design and performance conditionality determine whether sector-level support produces lasting productivity gains — the same question at the heart of the East Asian Miracle debate.

S7 Ep27: The World Bank's East Asian Miracle

VoxDev Development Economics

S7 Ep27: The World Bank's East Asian Miracle