Loading ...East vs West … a debate
Jostein Hauge@haugejostein
The rise of the East and the decline of the West can largely be explained by the relative power of private capital versus the state.
In East Asian countries — Japan, Singapore, and South Korea throughout the twentieth century, and more recently China and Vietnam — profit-seeking capital has not dictated the direction of investment. Instead, the state *governs* the market. This has enabled strategic long-term planning and the successful implementation of industrial policy.
By contrast, the West — especially the United States —has become so deeply financialized and so heavily influenced by private capital that investment decisions are overwhelmingly driven by short-term profits and the maximization of shareholder value. Long-term, productive investments that benefit the real economy have increasingly become a pipe dream.
https://x.com/haugejostein/status/2000948248979046480
Long response in comment 1
S Tominaga@CsTominaga
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14h
This is a neat story, but it collapses the moment you stop treating “the East” as a single model and stop confusing coordination with state control.
Japan, South Korea, and Singapore did not succeed because the state “governed the market” in opposition to private capital.
These nations succeeded because they aligned private incentives with long-term productivity, protected property rights, enforced contracts, invested heavily in human capital, and ruthlessly punished failure.
These states did not replace markets; they disciplined them.
Crucially, they did so in environments with export competition, price signals, and profit-and-loss feedback. Firms that failed died. Bureaucrats who misallocated capital were exposed. That is not central planning; it is competitive capitalism with guardrails.
China and Vietnam are even worse examples for this argument.
China’s growth explosion occurred after it partially released markets, allowed private ownership, tolerated profit, and plugged itself into global trade. The moment the Chinese state began reasserting heavy-handed political control over capital—crushing entrepreneurs, politicising credit, and subordinating firms to party loyalty—growth slowed, debt ballooned, and innovation fled. The data here is not subtle.
Meanwhile, the West’s problem is not “too much private capital” but captured capital.
Financialisation is not the natural outcome of free markets; it is the product of regulatory arbitrage, monetary distortion, moral hazard, and state-backed rent extraction.
When governments guarantee losses, subsidise leverage, and socialise failure, capital predictably becomes short-term and predatory. That is not capitalism running wild; it is capitalism warped by policy.
The idea that the state can simply “govern the market” into long-term prosperity ignores a basic reality: states have no profit-and-loss signal.
The government does not bear the cost of error. Industrial policy works only when embedded in competitive systems that punish mistakes. Once that discipline disappears, you get prestige projects, zombie firms, corruption, and stagnation—precisely what history shows again and again.
The West is not declining because markets are too free.
The West is declining because incentives are broken, accountability is absent, and political systems reward narrative over productivity. Replacing that with more state direction does not fix the problem; it finishes it. This is not an argument for laissez-faire mythology. I am giving an argument against confusing successful capitalism under constraint with bureaucratic control. The former builds nations.
The latter writes excuses.