Description: A central feature of modern Asia that trumps differences in economic and political systems is the web of close relationships running between and within business and politics; the connections world. These networks facilitate highly transactional interactions yielding significant reciprocal benefits. Although the connections world has not as yet seriously impeded Asia's economic renaissance, it comes with significant costs and fallibilities. These include the creation and entrenchment of huge market power and the attenuation of competition. They in turn hold back the growth in productivity and innovation that will be essential for further development. The connections world also breeds massive inequalities that may culminate in political instability. The authors argue that if Asia's claim to the 21st century is not to be derailed, major changes must be made to policy and behaviour so as to cut away the foundations of the connections world and promote more sustainable economic and political systems.
Brief description: Simon Commander is Managing Partner of Altura Partners and Visiting Professor of Economics at IE Business School in Madrid.
Review Quotes: 'The authors argue convincingly that Asia's connections world - deeply embedded networks of business groups, powerful families, and governments - contributed materially to its remarkable economic success with mostly extensive growth these past 40 years, by substituting for missing markets and weak formal economic, social and political institutions. This connections world is likely to become a serious drag on further economic progress now that many of Asia's successful economies have entered the stage of intensive, innovation-driven growth. There is too little competition and rivalry, entry and exit and creative destruction. Required reading for all those interested in the political economy of sustainable economic growth for the rest of this century in Asia and elsewhere.' Willem Buiter, Columbia University