Presentation for 'Malaysian Capitalism in Comparative Perspective' : Day 1 Prof. Sebastien Lechevalier 7 November 2016

1. A Malaysian French International Conference
Malaysian Capitalism, in Comparative Perspective

2. The Diversity of Asian Capitalisms:
results and next steps of an active
research programme
Sebastien Lechevalier
(EHESS, Paris)
Malaysian capitalism in comparative
perspective
Kuala Lumpur 7 November 2016

3. Purpose of this presentation
 To introduce the research programme on Asian
capitalism (state of the art and next steps) from both
theoretical & empirical perspectives
 To show that this branch of political economy can be
very useful to understand and interpret a certain
number of stylized facts
 To give Information on people and institution
 Very preliminary (and sometimes implicit) attempt to
situate Malaysia and ASEAN in this program

4. Introduction : Bringing Asia into
the Comparative Capitalism
perspective

5. Bringing Asia into the
Comparative Capitalism
Perspective (1/3)
 Creation of a research network on Asian capitalisms within
SASE (https://sase.org/) from 2012 (organizers: S. Lechevalier,
Boy Lüthje, C. Storz and T. ten Brink); MIT (2012), Milan
(2013), Chicago (2014), London (2015), Berkeley (2016), Lyon
(2017), Kyoto (2018)
 Special Issue of Socio Economic Review (April 2013, Volume
11, issue 2 ), co-edited by B. Amable, S. Casper, S. Lechevalier
& C. Storz) « Bringing Asia into the Comparative Capitalism
Perspective »
 Special Issue of Critique internationale (Avril 2014), co-edited
by Sébastien Lechevalier & Pauline Debanes: Towards a
revival of the developmental state in Asia?

6. Bringing Asia into the Comparative
Capitalism Perspective (2/3)
 In the debates in social, economic, and political sciences on the
diversity of capitalism, Asian capitalisms have been under-
researched. If at all, the literature has included Japan, but
neither systematically analyzed other Asian countries nor
embedded Japan into the Asian context.
 Theories and concepts of the comparative capitalism approach
have still to be applied to Asia and tested within these specific
institutional configurations. The very nature of capitalism, its
internal diversity, and its pattern of institutional change are
questions that are especially fascinating to analyze for Asia.

7. Bringing Asia into the Comparative
Capitalism Perspective (3/3)
 More precisely, Asia offers a rich and challenging empirical
ground to study the emergence and change of new types of
institutions (e.g. lack of a coherent institutional framework in
China, the contrasting speed of institutional change in Japan
and Korea, or the idiosyncratic industrial specialization in India
based on textile, IT and service).
 We hence suggest enlarging the analysis on the diversity of
capitalism onto Asia, and to enrich, contest or enlarge
established theories and concepts of the comparative
capitalism approach with empirical evidence of Asian systems

8. Contents
 State of the art:
1. Unity and diversity of Asian capitalism
2. Corporate diversity and institutional change (INCAS program)
 Next steps of the research program:
1. How to escape from the milddle income trap: innovation policy
and productivity issues?
2. Towards a revival of the developmental state in Asia?
3. Globalization, global value chains and industrial dynamics
4. Reduction of poverty but globalization of inequalities?
5. Social protection; beyond the sustainable and inclusive growth
framework

9. State of the art

10. 10
Is there an Asian type of capitalism? Results
of factor and cluster analyses with OECD
data (Amable, 2004)

11. 5 capitalisms (Amable, 2003): result
from institutional and statistical
analyses

12. Comments on Amable’s typology
 Asian capitalism in Amable’s typology = Japan and Korea!
(OECD data)
 Most of the analyses of East Asian capitalisms have
emphasized firm and industrial (=inter firm relations)
organization as the dominant characteristics from the
viewpoint of institutional hierarchy and relations between
employment and finance from the viewpoint of
complementarities (Whitley, 1994; Orru et al., 1997; Amable,
2003; Carney et al., 2009).
 Welfare has been recognized as a distinctive feature of some
European capitalisms; on the contrary, the dominant
understanding of Asian capitalisms is that they are an anti-
thesis of “welfare capitalisms” (e.g. Amable, 2003)

13. 13
Applying Amable’s methodology to Asian
capitalism (Harada & Tohayama, in Boyer et alii
(2011)
 Data:
1. 10 East Asian economies; 20 advanced capitalist economies
2. 6 institutional domains: financial market, labor market,
product market, international trade, education, social
security, economic development (GDP per capita)
 Methodology:
1. Multivariate analysis (MFA) = extended version of PCA
(principal component analysis): to find how institutional
variables coalesce in few axes and which individual variables
matter the most
2. Cluster analysis: to categorize different groups of economies

14. Preliminary analysis: Asian
capitalisms are different from other
capitalisms but do not fall in a single
category
 Results of the MFA:
1. Horizontal axis: degree of liberalization of different markets (degree of
economic development, competitive product market, higher level of social
security, less strict international capital control) vs. Difficulty of entry and exit
and/or difficulty of firing
2. Vertical axis: Contrast of trade dependence and domestic social expenditure
(public expenditure on education and dependence on external trade) vs.
rigidity of employment
 Results of the cluster analysis:
1. Indonesia, Philippines
2. China, Malaysia, Thailand
3. Hong Kong, Singapore
4. Japan, Korea, Taiwan
5. Advanced liberal capitalism (UK, USA, Australia, etc.)
6. Welfare capitalism (Norway, Sweden, Germany, etc.)
7. European mixed capitalism (France, Italy, Spain, etc.)

15. Figure 13.1: Relative positions of Asian
and advanced economies in the mid
2000s

16. A typology of Asian capitalism
1. Insular semi-agrarian capitalism (Indonesia, Philippines): lower degree of
liberalization of different markets, prevented by the experience of important
crises, evolving towards less liberalization and problematic industrialization
2. Trade-led Industrializing capitalism (Malaysia, Thailand): similar to group 1
in term of liberalization of markets but getting more industrialized; higher public
expenditure on education and dependence on external trade, less rigidity of
employment
3. City capitalism (Singapore, Hong Kong): significant degree of liberalization
of different markets, higher trade dependence, lower domestic social protection,
high profitability of the banking system
4. Innovation-led capitalism (Japan, Korea, Taiwan): a less coherent group
characterized by higher economic development and barriers to entry in their
product markets, essentially defined by its distance to other groups from a
statistical viewpoint
5. Continental Mixed capitalism (China): share many characteristics with group
2 but distinctive feature regarding the role of the State and peculiar evolution
between the mid-1990s and the mid-2000s that confirms a “selective embrace
of capitalism” (Chowdhury & Islam, 2007)

17. INCAS: “ Understanding institutional
change in Asia: A comparative
perspective with Europe”
 Research project by EHESS-Waseda-FUB-Oxford-MFJ (2015-
19) supported by RISE Marie Curie program (EU)
 Starting points: Corporate Governance in Japan: Institutional
Change and Organizational Diversity (Aoki, Jackson &
Miyajima, 2007), The Great transformation of Japanese
capitalism (Lechevalier, 2014) among others
 The project INCAS aims at creating a top-level research and
advanced training network on institutional change in Asia, in
comparative perspective with Europe

18. Corporate diversity and institutional
change
 Keywords: liberalization, internationalization,
financialization
 Focus: organizational dynamics of institutional
stability and change
 Major result: the process of liberalization did not lead
to the expected results: increasing heterogeneity of
firms, no institutional convergence, no better
aggregate outcomes,

19. Next steps of the research
program

20. How to escape from the milddle
income trap: innovation policy and
productivity issues?
 Diversity of national systems of innovation and no ”one best
way”:
1. The Silicon Valley model is very specific (sectors,
technologies, regionally, institutionally)
2. The Korean model has shown some strengths but may not be
reproduced in other environment
 Some general lessons:
1. Education and absorptive capabilities
2. Evolving productivity dispersion at the corporate level how to
promote spillover effects
3. Corporate heterogeneity and institutional coordination
 Should it lead us to adopt a critical perspective on the
Malaysian « NEM »?

21. The paradoxical revival of
industrial policies in a liberalized
environment : 2 publications
 Special Issue of Critique internationale (April 2014), “Towards a
revival of developmental state in Asia?”, edited by S. Lechevalier
& P. Debanes with contributions by Takaaki Suzuki (Ohio
University), Yin-wah Chu (Hong Kong Baptist University), Loraine
Kennedy (CNRS-EHESS), Joachim Ahrens (and Manuel Stark
(PFH Göttingen), Elisabeth Thurbon (University of New South
Wales)
 Special issue of Structural Change and Economic Dynamics
(forthcoming 2017), “Frontiers of industrial policy: structures,
institutions and policies” edited by Antonio Andreoni (SOAS), Ha-
Joon Chang (Cambridge) and Roberto Scazzieri (Bologna
University), with contributions by Michael Landesmann, William
Milberg, William Lazonick, Sebastian Lechevalier,
Mushtaq Khan, etc.

22. Frontiers of industrial policy:
structures, institutions and
policies (SCED, 2017)
 Over the past two decades the global manufacturing landscape
has been reshaped by profound structural transformation. Major
industrialised and emerging economies have reacted to (and,
sometimes, proactively triggered) these structural
transformations by adopting a wide range of industrial and
technology policies
 The special issue of SCED provides a systematic treatment of
the emerging focal policy domains : global structural change
and international trade; the relationship between manufacturing,
services and trade; global production networks and their impact
on employment and labour conditions; the creation of diffused
technical and industrial competencies via educational system
reforms; the role of finance and the impact of financialisation
on sustainable innovation…

23. “Financialization and industrial policies in Japan and
Korea: Evolving complementarities and loss of
institutional capabilities” by S. Lechevalier, P. Debanes
& W. Shin
 We argue that the financialization process, defined broadly as
the impact of the growing financial market intermediation on
social structures and dynamics, has been insufficiently taken
into account in order to understand and interpret the evolution
of industrial policy.
 As in other OECD countries, the rationale for industrial
policies (Ips) has been transformed. IPs are now designed to
fit with the liberalized environment in order to induce new
complementarities between the state and the financial
system. Notwithstanding, contradictions have developed as
symbolized by the systematic failures of IPs in some
domains (startups promotion)

24. The Japan and Korea cases
 Back to the Golden Age of IPs in Japan and Korea: when
developmental states put finance at the service of industrial
development (=precondition of success of IPs)
 Evolution of the position of the financial sphere through
financialization: from “financial containment and mobilization”
(“financial repression”) to “financial development and
disconnection”
 Revival of industrial policy? The contradictions of industrial
policy revival in a financialized environment: loss of institutional
capabilities and unstable political compromises
 Lack of the equivalent of Khazanah? Malaysia as a model
of strategic and long term finance?

25. Globalization, global value chains and
industrial dynamics in Asia and in the
world
 “The originality of Asian economic integration provides a strong
incentive to extend régulation theory to a new domain, namely,
that of international relations and the dynamics of the world
economy” (Boyer et al., 2011)
 Possible negative side effects : Globalization and labor market
outcomes : De-industrialization, job security, and wage
inequalities:
1. Revisiting the impact of globalization (FDI & trade) on wage
inequalities: the micro channel, China factor and fragmentation
of production
2. Industrial structure and quality of work

26. 26
Understanding the increasing interdependencies
between Asian economies: an alternative model to
the EU
 Economy first (at the firm level), politics second
 Mechanisms behind the fragmentation of production:
FDI, increasing international production linkages
among Asian economies
 Key issue: which position within the global value
chains?
 No perfect model: limits on the political side of the
regional integration in Asia

27. Reduction of poverty but
globalization of inequalities?
 Globalization has contributed to the reduction of poverty but
also to the increase of inequalities
 The Malaysian case is here exemplary
 How to understand this double trend? Is there a paradox? Do
we observe a globalization of inequalities?
 Globalization of inequalities: Bourguignon (2012) and to
some extent, Piketty’s capital

28. Globalization of inequalities or diverse
socio-economic regimes of
inequalities?
 Diversity of socio-economic regimes leading to
inequalities
1. K. Thelen (2014), Varieties of Liberalization and the New
politics of Social Solidarity, Cambridge University Press
2. Boyer R. (2015), A World of Contrasted but Interdependent
Inequality Regimes: China, United States and the European
Union, Review of Political Economy 27 (4)
3. Connecting globalization, industrial dynamics and inequalities
4. Revisiting cross-national variations in preference for
redistribution. Attitudes to inequalities, social beliefs, and
welfare systems (Lechevalier, 2016)

30. Social protection; beyond the
sustainable and inclusive growth
framework
 Changing the perspective: not promoting a
sustainable and inclusive growth framework
(sustainability and inclusion are considered ex
post) but showing how can social protection
contribute to growth, as it did in Europe in the post
war period
 Different visions:
1. Social investment (e.g. Bruno Palier)
2. Human reproduction: capitalism, welfare and the
intimate life (Capwelcare program)

31. Theoretical argument
 Most of studies on welfare systems have tended to focus on
Europe (eventually by comparison with the US)
 This is particularly the case of the institutionalist approaches
of the diversity of capitalism and institutional change
 It leaves aside (if not ignores) rules, practices and evolutions
in Asia
 It leads to various problems, especially: a) a poor
understanding of Asian capitalisms; b) a biased
understanding of social protection dynamics
 Our argument is that bringing Asia may contribute to a better
understanding of the dynamics of capitalisms and welfare
systems, beyond the Asian cases

32. “Asian” welfare systems before the reforms:
developmental welfare states/productivist
welfare capitalisms
 A growth-oriented state: subordination of all aspects of state
policy, including social policy, to economic/industrial objectives
(Holliday, 2000);
 Some similarities:
1. Governments were relatively low spenders on social welfare
(even when we broaden our calculations to allow for the state’s
regulative function)
2. The notion of state-provided welfare as a social right of
citizens was weakly developed
3. The principle of social insurance was favoured
4. Institutional segmentation of State-sponsored welfare
programmes, which both reflects and reinforces differentials in
power and status in society

33. Current evolutions - Stylized facts
 Beyond “productivist welfare capitalism” / developmental
welfare systems: welfare developments are no more simply
subordinated to economic goals (expenditure and logic of the
system). It does not mean that they have become fully
autonomous
 Deepening/strengthening of welfare rather than expansion
 The idea that Asian welfare systems are becoming less
selective, more inclusive should be discussed as “dualization”
(or “resegmentation”) of labor markets is observed in
countries such as Japan or Korea for example
 Still difficult to see the trajectory (which is not
predetermined. In particular, failed political attempts or failure of
politics to take into account social demand for welfare
expansion do not mean that nothing is changing

34. 34
Globalization, liberalization, and
welfare deepening: is there a paradox?
 Debate between two views:
1. View 1: the neo-liberal nature of globalization and the
increasing role of MNCs render the institutions of the state
(especially welfare state) of marginal importance in economic
life.
2. View 2: state institutions (and welfare state in particular) work
as shock absorber amid instability and flexibility in a
globalized market. (positive correlation between social
expenditure ratios and the openness of the market (Rodrik,
1998).
 Looking for another set of explanations: articulating
structural factors (including contradictions between the
global context and the domestic economy) and political
dynamics

35. Asian capitalisms from the viewpoint
of welfare: our argument
 New forms of welfare are emerging in Asian capitalisms, as
political answers to demands from various groups, in the context of
social changes (ageing, evolving structure of families), limits of
former model (corporate and growth oriented), and evolving social
compromises (rising inequalities, evolving risk sharing);
 CAUTION: discussing the causality
 Welfare arrangements may become a distinctive feature of
these forms of capitalisms, with two meanings:
* no more at the bottom of the institutional hierarchy;
* and different from the European style of welfare systems
but also a major source of divergence among them (see for
example the comparison between Japan & Korea in
Peng (2004) & Takegawa, 2005)

36. Capitalism, Welfare Regime and Intimate Sphere:
Theory of Human Reproduction in Mature
Societies in Europe and East Asia
(CAPWELCARE)
 2016-2019 research project supported by the JSPS and the
CNRS and based on a collaboration between Kyoto University
(Emiko Ochiai) and the EHESS.
 This research program aims at integrating three frameworks
that are formally separated in different disciplines: studies on
the diversity of capitalism, on welfare regimes, and on the
intimate sphere.
 It will permit to build a theory and methodology to deal with
human reproduction in mature societies, while trying to
link it to the dynamics of capitalism, which leads to the
reproduction of social classes.

37. Conclusions

38. A lot to be done…
 By Malaysian researchers themselves
 In collaboration with other Asian researchers
 Possibility of collaboration with EHESS:
1. International invitation program (few days, 1
month, 1 year)
2. Master and PhD programs
3. Within the Chair on Asian capitalisms

39. Information about a new trilateral
research program : Japan, Europe, and
ASEAN
 2017-2021 research program sponsored by the
Japan Foundation
 Trilateral project: CSIS (Jakarta), GRIPS (Japan)
and EHESS (France)
 Kick-off meeting: Spring 2017 in Paris
 This research program includes various sub
research agendas (from geopolitics to inequalities)
 Institutional change and diversity of capitalism in
ASEAN is one of them
 A possible framework for our future
collaboration?

40. Welcoming you in France in June
2017!
 Congress of the French network of Asian Studies –
Réseau/GIS Asie (Paris, 26-28 June 2017)
1. http://www.gis-reseau-asie.org/
2. Caution: the deadline to submit panels is November 13th!!
(Date may be postponed for our Malaysian colleagues)
 2017 SASE meeting (Lyon, 29 June-1st July)
1. https://sase.org/
2. Submission between early December and early January
3. Network Q on Asian capitalism
4. FFJ prize for the best article on Asian capitalism

41. Thank you for your attention
sebastien.lechevalier@ehess.fr