Is inclusive growth still possible with post-industrial transformation? Emerging evidence from East Asia in a historical institutionalist perspective

Introduction

There is a lively scholarly discussion on growth slow down, rising inequity and precarity, and polarizing politics that calls into question the future of capitalist democracies (e.g. Wolf 2023). The bulk of these discussions centre on advanced democracies of the West, and pertain to what economists identify as the problem stemming from decades of ‘de-industrialization’: a process that involves the hollowing out of the manufacturing sector (Szirmai et al., 2013). De-industrialization – or more precisely, ‘de-manufacturing’ – is problematic as it is on the backs of sustained innovations in manufacturing that industrial advances are made. Contrary to the conventional wisdom, industrial advances do not occur in succession from agriculture to manufacturing to service sector, but rather through linkages across the sectors via gains in manufacturing (Cohen and Zysman 1987: 12-27). This special issue project takes the discussion beyond the confines of economics and the concept of de-industrialization (and de-manufacturing) to examine growth slow down, rising inequity and precarity, and polarizing politics in the context of ‘post-industrialization’. This is a concept used in cognate disciplines of economic sociology and political economy to capture a broader socio-economic and political process that involves the coming together of three major trends: servitization, computer-based digitalization and automation, and women’s participation in the economy en masse (Block 1990). It does so with focus on East Asia, a region that has not de-manufactured, but is nevertheless undergoing a post-industrial shift, and experiencing the challenges associated with aligning growth with equity (hereinafter, inclusive growth).

Compared to the advanced West united by capitalism and democracy, East Asia, comprised of both Northeast and Southeast Asia, is far less homogeneous in terms of levels of capitalist (market) development and types of political (representation) regimes. In the region are the ‘emerged’ capitalist democracies – better known as the East Asian ‘Tigers’ (i.e. Japan, South Korea, Taiwan, and Singapore) – as well the ‘emerging’ transitional economies with one party-state regime, often referred to as the East Asian ‘Dragons’ (i.e. China and Vietnam). Such a diversity makes it highly challenging to derive a region-bound insight that can serve as the bases for comparative research on post-industrial possibilities for inclusive growth. This special journal issue lays down the groundwork, paving pathways for not only within-region comparisons that can deepen our understanding of East Asia, but also cross-regional exploration that can generate useful ‘middle-range’ insights that sits between universal knowledge on the one hand, and context-specific knowledge that cannot travel on the other (Kang 2014). The articles are united in that, first, they are authored by economic sociologists and political economists with a country-specific (and in the case of Taiwan, territorial-specific) expertise, bringing their knowledge of theory and concepts in their respective fields together with their empirical context. Second, the articles take a ‘historical institutionalist’ approach, that entails providing thick descriptions of how the socio-economic and political institutions – that is, rules and regulations governing the behaviour of the state, capital, and/or labour – of their industrial past continue to shape their post-industrial future (Mahoney and Thelen 2009). Together, the articles explore from various perspectives the possibilities of inclusive growth, of lack thereof, in the context of post-industrial transformation.

Post-Industrialization and Inclusive Growth

The term ‘post-industrial’ emerged as early as the 1970s to capture a socio-economic phenomenon that is distinct from the industrial (Bell 1976), yet it took another two decades for the phenomenon to unfold, and the term to gain more conceptual depth (e.g. see Block 1990; Esping-Andersen 1999). As identified by economic sociologist, Block (1990), three major trends mark the shift from industrial to post-industrial in the advanced West: The first trend is the growing importance of services in the economy, compared to goods production in manufacturing, farming and mining. Although the service category is highly heterogeneous, the point remains that the factory floor has ceased to be the central locus of employment, and with it, the tension and conflict around work moves from the factory to the offices in a wide range of services including legal, financial, health, and education. The second trend is the arrival of computer-based digitalisation and automation, which now includes artificial intelligence (AI), that changes the nature and organization of work from narrowly defined codified and routine tasks that can be done with relatively little cognitive attention (mid-skills) to the new forms of ‘knowledge’ work that require critical and creative problem-solving skills and demand more cognitive attention (higher skills). AI is fast-replacing mid-skills and some segments of the higher skills, which is creating havoc in the labour market (Autor 2019). The third trend is the decline of patriarchy and women’s participation in the economy en masse. Although many of the gender-based inequalities remain, massive entrance of women into paid labour has changed the nature of work and employment, as well as having a broader significance on families, and the economy and society at large (Esping-Andersen 1999).

The three post-industrial trends are working in tandem, and in complex ways testing the social foundations of inclusion derived in advance industrial societies (Esping-Andersen 1999). As evidenced by Goldin (2021) in the U.S.A, post-industrial jobs, especially in services (e.g. financial and legal services), are structured and remunerated to enhance temporal flexibility, which rewards employees who are able to labour long and varied hours. This makes the distributive policies that address care responsibilities – child and elder care – vital. Prior studies have shown that compared to the U.S.A., Northern European states were able to shape distributive policies in ways that better managed the massive entrance of women into paid labour due to their pre-existing social foundations that underpinned social democracy and their affiliates (i.e. left-leaning parties and unions) in the post-WWII period (Esping-Andersen 1999: 179). But even there, with globalization a la neoliberalism and driven by the power and interests of global corporations (Crouch 2011), the social foundations for inclusion were eroded, turning post-war welfare states into so-called ‘competition states’ whose primary goal is to improve the nation’s position in the global economy (Cerny 1997). The focus in political economy since the 2000s has been on the first two trends, neglecting the third, notwithstanding efforts made by scholars to ‘gender’ the political economy (e.g. see Estevez-Abe 2006; Mule and Rizza 2023). We return to the neglected third trend in the conclusion.

Focussing on the first two trends – that is, servitisation, and computed-based digitalisation and automation – the oft-used term favoured by scholars is no longer ‘post-industrial’, but rather ‘knowledge economy’ (e.g. Hall 2022; Hall 2022; Iversen and Soskice 2019), and taking stock of more than two decades of knowledge economy literature leaves us with two key insights. First, the post-industrial shift is a long-running process marked by three distinct eras – that is, the modernization era that marks the height of industrialization (1945–70s), liberalization (1980s–90s), and the knowledge economy (2000s–present) that marks the post-industrial shift. Second, the three eras are defined by the mutually constitutive effects of growth regimes and representation regimes (Hall 2022). What makes the modernisation era distinct from the latter two eras is the complementarity between growth and representation regimes, which was underpinned by the social foundations for distributive policies. These policies had elements of ‘re-distribution’ (through social and welfare policies), as well as ‘pre-distribution’ (through public investments in mass public education and corporate investments in training for skills upgrading) (Somers 2021), which consequently lead to the emergence of sizable and stable middle classes that held their representative governments to account (Lazonick and Shin 2019). In short, the two types of distributive policies became the channel by which growth with equity was attained.

However, the complementarity between growth and representation regimes unravelled from the liberalization era onwards, and for the aspirant middle class, life that many came to expect for themselves and their offsprings became out of reach (Iversen and Soskice 2019). To lead a middle class existence, one needs to earn a decent income over 30 to 40 years of their working life, with enough left over to support a decent standard of living for some 20 years, on average, into retirement (Lazonick and Shin 2019: 6). Yet, the post-industrial shift – digitalisation, automation, and AI – that is driving the knowledge economy era generates ‘jobless growth’ where only the small number of the very highly skilled have the opportunity to tap into global wealth streams of the era, while the majority are left behind (Iversen and Soskice 2019). Without the pre- and re-distributive policies of the modernisation era, the aspirant middle class are left to mitigate the risk by making enormous private investments in global (elite) education and on-going skills development, often through debt, with less and less social safety net. New social foundations for inclusion that create a secure middle class is required, but the middle class – which holds elective affinities with both capital and labour (Giddens 1995: 121) – are now divided by the new global-national divide that does not neatly align with the old party politics of right and left (Gethin et al., 2022). Thus, parties of right and left are giving less weight to socio-economic issues (class politics), instead more to socio-cultural issues (identity politics) around ethnicity, race, gender, and/or their intersections (Hall 2022).

Many have observed broad-stroked similarities in the developing world, often using Modi’s India or Putin’s Russia as illustrative examples (Bardhan 2022; Fukuyama 2018). These societies have been ushered into post-industrialization amid premature de-industrialization (more specifically, de-manufacturing) that has weakened their growth regimes, leading to either ‘middle class revolts’ with a right-wing populist flavour in older (one party dominant) democracies such as India (Kurlantzick 2013), or created an In other parts of the developing world, from Bangladesh to Indonesia, the offsprings of the aspirant middle class have taken to the streets angry over the lack of opportunities, demanding changes in their representative governments (Schipani 2025). Turning to East Asia, what invites a deeper look is that despite the on-going advances in manufacturing, it is nevertheless experiencing similar kinds of tension and conflict over distributive policies observed across the advanced West and developing worlds. The articles in this special journal issue illuminate these tensions and conflicts.

The paper on Japan by Sébastien Lechevalier and Saori Shibata takes a deep look into the country’s hospitality sector to examine how the two post-industrial trends – servitisation and digitalization – have come together since the liberalization era. The authors’ portrayal of the Japanese state is that of a competition (than a developmental) state, and argue that their firms indulge in a human resources’ race to the bottom. This change in growth regime has had profound consequences for the so-called ‘wage-labour nexus’ – that is, the interplay between labour organization, workers’ ways of life and the ways in which they are reproduced (p.3) – for there has been a degradation of the quality, range, and depth of knowledge necessary to perform the job. When we place the finding on the ‘de-skilling’ in the context of the ‘index of equal opportunity’ (Iversen and Soskice 2019: 233) which shows Japan performing far worse than their advanced West counterparts, largely because of low pre-primary public spending and high private share of tertiary spending, it is evident that the pre-distributive policies of the modernisation era has been undermined, making Japan’s post-industrial growth less inclusive than the past.

In a similar vein, the paper on South Korea by Francis Yoon examines pre-distributive policies, questioning who is taking the responsibility for high skills formation in the country’s shift from industrial to post-industrial. He examines the large industrial conglomerates, known as the chaebol, in the export-oriented manufacturing sector who, during the country’s modernisation era, had invested in skills development of their core workers. He argues that since the liberalization era, and in particular, following the corporate bailout and restructuring that ensued in the aftermath of the Asian Financial Crisis (1997–98), even core workers have been subjected to non-standard forms of employment, with the high value firm-specific skills that make up the so-called ‘core work’ (p.2) being outsourced to subcontractors. Furthermore, this has occurred even in the most advanced and knowledge-intensive manufacturing sectors that are highly unionized. When we consider the finding that the chaebol are no longer taking responsibility for high skills formation, alongside the fact that South Korea the most automated country in the world and its firms have been forerunners in the adoption of AI, it is clear that old pre-distributive policies have been undermined, making the country less inclusive than the past, and possibly at a faster pace than Japan.

The paper on Taiwan by Tat Yan Kong and Yin-Wah Chu takes a political turn by underscoring the importance of the representation regimes and their complexities, when examining growth regimes. They ask what is driving Taiwan’s state to pursue ‘inegalitarian’ growth in their post-industrial shift. They argue that the representation regime in the modernisation era was underpinned by the combination of ‘state insecurity’ (i.e. external threat from mainland China) and ‘regime insecurity’ (i.e. regime vulnerability amid hostility from the local Taiwanese population against the emigree government) (p.2). From the liberalisation era onwards, the two types of insecurity become de-aligned. On the one hand, the regime became more secure with transition to democracy that created opportunities for local Taiwanese to exercise their voice and exert influence through political parties. On the other hand, state insecurity became heightened, forcing the Taiwanese state to adopt a dual strategy of promoting outward FDI to China, whilst controlling critical technologies that can position the Island strategically in the tech war between China and U.S.A. The implication of their finding is that the Taiwanese developmental state has been replaced by a competition state, heavily focused on big businesses such as the Taiwan Semi-Conductor Manufacturing Company (TSMC) and small segments of highly skilled workers in the industry, which is hurting Taiwan’s past record for growth with equity.

Similar to earlier papers, the paper on Singapore by Eddie Choo and Vincent Chua also evidence the post-industrial shift and problems in maintaining growth with equity in the city-state. However, what is unique in Singapore’s case is that the state’s commitment to growth with equity that was lost during the liberalization era is firmly back on the state’s agenda in the knowledge economy era. They argue that from 2011 General Election onwards, Singapore’s once ‘de-politicized’ state has ‘re-politicized’ on the issues of social inequality, precisely because of its one-party dominant representation regime. In order for the People’s Action Party (PAP) to maintain its dominance, the party leadership has become sensitive to citizens’ concerns over re-distributive policies. The authors’ portrayal of Singapore’s re-politicised state is not one that has turned into a competition state as in the case of Japan, Taiwan, or even South Korea (see Kang and Jo 2021) but rather a developmental state becoming more adaptive to ‘policy-stretches’ of balancing pre-distributive and re-distributive policies, and in ways that go beyond their well-known public housing schemes (p.9). The article raises comparative questions as to whether Singapore has done better on the inclusive growth front compared to three Tigers – Japan, Taiwan, and South Korea – despite being considered a laggard in their democratic transition, and if so, whether it presents a more suitable road map for the Dragons such as China and Vietnam.

The paper on China by Shaohua Zhan reminds us that East Asian developmental states have historically been responsive to popular demands for re-distributive policies, and China is no exception. In the post-war period, the Tigers had responded to the popular demand for re-distribution through land reform, creating a rural middle class (Davis 2010), who later with industrialization and urbanization that accompanied state-led housing schemes became the urban middle class (Yang 2018). The author traces how the Chinese state, since its liberalization era marked by the transition from a planned to a market economy, has dealt with the ‘dynamics of land struggles’ that has intensified (p.2), focussing on compensation policy for land dispossession. He argues that the Chinese one-party state is not unresponsive to popular demands, especially at the central level, and that protests launched by land-losing villagers in the new millennium changed the state’s compensation policies in ways that accommodated their grievances and needs better: from compensating land-losing villages with undervalued agricultural output measured in monetary terms to compensating with social insurance schemes and urban housing. However, given the volatility of the housing prices, these compensations have not led to secure livelihoods, and often becoming the source of inequality and precarity. Given that China, which is still in the upper middle-income category, has not yet created a large and secure middle class that can exert steady demands for re-distributive policies (Wietzke and Sumner 2018) – and that as a ‘techno-developmental’ state it relies on surveillance to manage dissent (Lei 2023) – questions arise as to whether the one-party state can balance re-distributive with pre-distributive policies, and in ways that go beyond ad hoc compensations.

Last but not least, the paper on Vietnam by Robyn Klingler-Vidra, Adam William Chalmers, and Ba Linh Tran brings the discussion back to pre-distributive policies to investigate what the arrival of post-industrialization means for a country in the lower middle-income category that has not yet matured industrially. The authors critically examine the state’s post-industrial drive that comes in the form of supporting digital start-ups and ask if this drive is aiding what they call ‘social inclusion’, that is, the terms on which individuals and groups enhance their abilities and access to opportunities (p.3). By identifying the socio-economic profiles of high-performing digital entrepreneurs, the authors argue that those that have benefited from the country’s post-industrial shift is the offsprings of the upper middle class that have accumulated wealth since Vietnam’s Doi Moi reforms in the liberalization era. This is because they have the means to acquire global (elite) education and access to financial and social capital. They argue that upward social mobility that would allow for the growth of large and secure middle class has been undermined, making Vietnam’s growth less inclusive than one might expect of a developmental state.

Conclusion: The quest for inclusive growth

East Asian Tigers and Dragons alike have attained a relatively good record of growth with equity in their respective modernization eras, taking a balanced approach to re-distributive and pre-distributive policies to ensure that the fruits of industrialization trickled down. This, and their continued commitment to advance manufacturing, places them in a better position to attain inclusive growth with the post-industrial transformation than the advanced West. Yet, the articles are united in that the region is experiencing similar kind of challenges because the post-industrial shift that comes on the back of the liberalisation era leaves little room for the construction of welfare states. Rather, the common trend (bar Singapore) is where developmental states well versed in balancing the two kinds of distributive policies are fast evolving into competition states whose focus lies in enhancing national competitiveness in the global economy.

Overall, East Asia as a region does not provide the answer to making post-industrial growth more inclusive. Rather, by examining East Asia, this special journal issue lays down the groundwork that could drive the scholarship in this direction. What we do know is that for post-industrial growth to be inclusive, the social foundations for a balance between re- and pre-distributive policies are needed. Question up for grabs is what kind of representation regime best accommodates for the emergence of such social foundations. It was noted earlier that Singapore is the exception where the political leadership renewing their commitment to re-distributive policies in order to prolong PAP’s one-party dominance. This exception opens interesting avenues for comparative research. For instance, if there is comparable evidence that Singapore is indeed doing better on the inclusion front than say Taiwan and South Korea, questions arise as to why Singapore’s one-party dominant democracy would perform better than Taiwan and South Korea’s multi-party democracies.

Relatedly, we can ask just how responsive is Singapore’s one-party dominant democracy from China and Vietnam’s one party-state to distributive demands of the middle class? A note of caution is that when undertaking on comparisons between the Tigers and Dragons one needs to be sensitive to not only different levels of capitalist (market) development, but varying degrees of ‘compression’ (Chang 2022; Whittaker et al., 2020) that comes from fast-paced shift from industrial to post-industrial. For instance, in the case of the Dragons, the higher degree of compression, compared to the Tigers, can give rise to different social foundations of inclusion, truncating the middle class formation to create a smaller and more vulnerable middle class, creating an autocratic middle class.

By way of conclusion, we end with some thoughts on the third post-industrial trend – that is, women’s participation in the economy en masse – overlooked in the knowledge economy literature, and by extension this special issue. South Korea provides us with the most extreme case of accelerated post-industrial transformation in the two trends, without sufficient attention to the third. Consequently, the tension and conflict around equity, especially amongst the young adults, has taken on a stronger gender dimension than anywhere else (Kang and Loy. 2025). Questions arise as to why, and if indeed this is related to varied ways in which democracy has institutionalized, with South Korean party politics less able to accommodate for ‘militant’ unions compared to Taiwan’s ‘partisan’ ones (Lee 2011, 2022), with lingering implications for gender politics (Go 2025). This special journal issue shows that East Asia, and other under-represented regions, can present a rich site for comparative research into post-industrial possibilities and the future of capitalist democracies.