Theorizing Ersatz Capitalism in Southeast Asia: Theoretical Considerations and Empirical Outlook

Despite considerable economic growth in Indonesia and Malaysia during the last decades, the political goal of generating a class of domestic industrial entrepreneurs has not been achieved. It is rather the case, that Southeast Asian firms in the manufacturing sector are characterized by inefficiency and technological backwardness. The inability of the state to develop the economy inspires the notion of Southeast Asian ersatz capitalism.

Due to internal and external political blockades, the Southeast Asian alternative to the developmental state is merely an inferior duplicate, respectively ersatz, of the Northeast Asian model. While crony capitalism and ethnic affirmative action policies constrain the internal capacity of the state, international political blockades and restricted technological access act as external factors favouring the ersatz character of Southeast Asian capitalism.

The internal capacity of the state may be conceptualized from an institutional perspective, whereby the relationship between markets and states refers to the diversity of national governance structures. The theory of comparative capitalism is approached to analyse these differences in national institutional systems. The notion of path dependency is relevant, e.g. concerning the development of the Indonesian type of ersatz capitalism, which follows a distinctive path and evolves from the country’s own historical legacy.

The political economy and the role of politics and the state is essential for the analysis of Southeast Asian economies. The thesis of ersatz capitalism posits the inefficiency of Southeast Asian state sectors due to their nature of cronyism. Southeast Asian government interventions in the economy are often driven by issues of interethnic redistribution and the promotion of patronage networks.

The international context remains significant, specifically regarding the reliance on FDI and the technological dependence on foreign TNCs. The technological backwardness of Southeast Asian economies and restricted access to world market technologies depicts a decisive factor that inspires the notion of ersatz capitalism.

No Southeast Asian country, not even the relatively wealthy Malaysia, has shown indigenous capacities to design, innovate and commercialize into new and more profitable sectors. The lack of assertiveness of local Southeast Asian firms to compete in the world markets is a crucial element of the thesis that describes Southeast Asian economies as ersatz capitalism. The considerations of ersatz capitalism aim to contribute to the theories of comparative capitalism.