This paper by Dani Rodrik challenges the conventional narrative that export orientation was the primary driver of South Korea and Taiwan's economic growth in the 1960s and 1970s. Instead, it argues that a significant increase in investment demand, facilitated by government policies, was the key factor. The paper highlights that the measured increase in the relative profitability of exports during this period was too small to account for the subsequent export boom. It suggests that the governments of both countries engineered a substantial increase in the private return to capital through investment subsidies, administrative guidance, and the use of public enterprises. These interventions were effective due to the countries' favorable initial conditions, including a well-educated labor force and equitable income and wealth distribution. The paper also discusses the role of savings, import liberalization, and the importance of initial conditions in shaping the economic performance of South Korea and Taiwan.This paper by Dani Rodrik challenges the conventional narrative that export orientation was the primary driver of South Korea and Taiwan's economic growth in the 1960s and 1970s. Instead, it argues that a significant increase in investment demand, facilitated by government policies, was the key factor. The paper highlights that the measured increase in the relative profitability of exports during this period was too small to account for the subsequent export boom. It suggests that the governments of both countries engineered a substantial increase in the private return to capital through investment subsidies, administrative guidance, and the use of public enterprises. These interventions were effective due to the countries' favorable initial conditions, including a well-educated labor force and equitable income and wealth distribution. The paper also discusses the role of savings, import liberalization, and the importance of initial conditions in shaping the economic performance of South Korea and Taiwan.