From the 1960s until the end of the twentieth century, Singapore and Thailand were two of the world's unambiguous economic success stories. The statistics have been recounted often, but even so, they still manage to astound. Between its first full year of independence in 1966 and 2009, per capita GDP in Singapore increased an order of magnitude from about $5,000 per person (in real 2005 dollars) to just shy of $50,000. Annual income growth averaged about 6.5% until the Asian Financial Flu of 1997. Essentially, over the course of a generation, Singapore transformed itself from a basket case economy to a country whose wealth was on par with that of the United States. Thailand's trajectory was no less impressive. Between 1950 and 2009, per capita income increased over seven times from about $1,000 per person to just under $8,000.

Millions were lifted out of poverty in the two countries over the years. Yet as the century came to a close, the specter of diminishing returns loomed large over Singapore and Thailand, and prognosticators began to reach some rather dismal conclusions about the countries’ futures. It had become clear, many argued, that their tremendous growth rates originated from unsustainable levels of capital and labor mobilization, while technological progress, the key to persistent gains in per capita income, was virtually nonexistent (Collins and Bosworth, 1996; Young, 1995). The implication was as clear as it was bleak; the astounding gains in income and well-being these countries experienced in the past simply could not continue going forward. Paul Krugman's analysis of the Singaporean economy was typical: