Governments chose strategies ranging from state socialism to welcoming foreign investment. Their choices did more than anything else to explain why economies diverged.
Every government set economic aims, but strategies differed. Some relied on the state to run the economy. Others used the state to support private and foreign businesses.
Singapore's government planned growth carefully. Its Economic Development Board, set up in 1961, attracted multinational companies. The state also built industrial estates and public housing, and it ran companies through Temasek Holdings, set up in 1974.
Indonesia under Suharto relied on economists trained in the USA, often called the "Berkeley Mafia", to control inflation and attract investment. It used oil revenues from the 1970s to build schools, roads and rice programmes.
Malaysia's New Economic Policy used the state to raise Malay ownership and incomes. It created state enterprises such as PERNAS (1969) and the national oil company Petronas (1974).
Burma chose state socialism. After 1962 the government nationalised business, closed the economy to the world and ran it badly. By 1987 the UN classed Burma as one of the world's least developed countries.
- EDB
- Singapore, 1961.
- Temasek
- Singapore, 1974.
- Petronas
- Malaysia, 1974.
- Burma
- Classed by the UN as least developed, 1987.
Worked example: Comparing strategies
How did government strategies differ?
- Singapore: state-led and open to multinationals.
- Indonesia: technocrats plus oil revenue.
- Malaysia: growth with ethnic restructuring.
- Burma: closed state socialism.
Watch out for this
More government intervention always meant slower growth.
Singapore's government intervened heavily, but in support of markets and investment. Burma's intervention failed because it shut out markets and investment.
Check your understanding
What did Singapore's Economic Development Board do?
- It attracted multinational companies to invest in Singapore.
- It nationalised all businesses.
- It ran rice farms.