Other economists who have long invoked the Japanese and East Asian “middle way” of market-sensitive government industrial support agree. “I wouldn’t attribute too much to Japan’s quarterly growth rate–but I would give them some credit for not leaving as many people behind,” said Nobel-winning economist Joseph Stiglitz of Columbia University. “The big advantage they had was that before their malaise set in, they had achieved a far more egalitarian state.” Or as International Monetary Fund (IMF) economists Fuad Hasanov and Reda Cherif conclude in one recent paper, the Asian miracles’ economic models–mainly the ones used in Hong Kong, South Korea, Singapore, and Taiwan–“resulted in much lower market income inequality than that in most advanced countries.”

How did East Asia do it? By focusing on export competitiveness and forcing subsidized firms to compete in global markets, these countries created good jobs for the middle class and avoided the pitfalls of failed “import substitution” policies that have characterized bad industry policy in the past across countries from Latin America to Africa. Building upon that, they also imposed progressive tax systems.

By contrast, there is also some agreement that one reason for China’s slowdown is that its dictatorial leader, Xi Jinping, has cracked down too harshly on the market part of the economy, disturbing the delicate balance of government-vs.-market control that began in the late 1970s. Xi “doesn’t seem to know how to use the levers of government with subtlety or within a market framework,” Stiglitz said.

When the Asian financial crisis hit in the late 1990s, the neoliberals at first claimed vindication, saying corrupt crony capitalism and heavy government interference were to blame.

All this is surprising, because in the policy debate with advocates of East Asian-style market intervention, the Washington Consensus had until fairly recently been winning, hands down. “Industrial policy” of the kind practiced by Japan and other East Asian nations was toxic and had to be practiced, at best, below the radar, especially in the United States. Capital flows were heedlessly unleashed around the world and market barriers eliminated at the insistence of both Democrats and Republicans in Washington. When the Asian financial crisis hit in the late 1990s, the neoliberals at first claimed vindication, saying corrupt crony capitalism and heavy government interference were to blame. But after the 2008 crash sank Wall Street–and nearly the entire U.S. financial system–it was clear that the crisis was, in fact, one of global capitalism and the excesses of neoliberalism. The problem in both the U.S. and Asia wasn’t the heavy hand of government so much as its opposite: totally unregulated capital flows and financial markets, not to mention (in the United States) regressive tax policies that favored Wall Street and capital gains earners.

As Eisuke Sakakibara, Japan’s former vice minister of finance and international affairs and one of Asia’s intellectual champions for an alternative model, told me presciently back then: “Global capital markets are responsible to a substantial degree. If you look at the so-called Asia crisis, the root cause has been the huge inflow of capital into Malaysia, Thailand, South Korea, and China. And all of a sudden … all of that has [fled] from those countries. Borrowers have been borrowing recklessly, and lenders have been lending recklessly. And not just Japanese banks. American banks and European banks as well.” Sakakibara proved to be correct, and something similar–indeed, much worse–struck the U.S. economy nearly 10 years later.

Beyond that, it was also clear during this three-decade period that China was paying scant attention to trade rules, deploying among other systematic violations industrial espionage, investment controls, currency manipulation, and intellectual property theft. During the same period, American confidence was badly misplaced that the nation’s high-tech advantages would automatically translate into a new manufacturing age for the middle class. It wasn’t just American capital that was fleeing abroad: By the mid-1990s, it was obvious that Silicon Valley-style startups don’t take one’s economy very far when most of the scale-ups–the manufacturing and downstream jobs, in other words–are happening overseas in low-wage countries.

So neoliberalism’s been dying ever since, and Donald Trump and Joe Biden have delivered the death blows. The most significant failure, perhaps, was not purely economic but social and political. It has become clear that in the United States, as well as in other major Western economies such as Great Britain, deepening inequality brought about by an almost religious devotion to neoliberal thinking has generated jarring social instability and populism on the right and left. Trump and former British Prime Minister Boris Johnson turned the two democracies that built the postwar global economic system into anti-globalist, inward-looking confederacies. Trump focused his ire on starting a trade war and crippling the World Trade Organization (WTO), and Johnson stormed out of the European Union. How did we get to this topsy-turvy place? A little historical perspective might help.

It began about three decades ago, when U.S. President Bill Clinton rolled into office in the triumphalist aftermath of the collapse of the USSR and decided that markets and globalization were the answer–even for formerly progressive Democrats like him. Command economies were utterly discredited. So was big government in the United States. And in the developing world, government intervention–so-called import substitution, meaning the support of domestic industry and the closing of trade barriers to foreigners–had also been an abysmal failure, especially in Africa and Latin America, leading to corruption and endemic poverty.

But then there was that strange outlier, East Asia. The East Asian “Tigers,” inspired by the postwar champion of managed economies, Japan, had dared to tinker with market forces like demiurges playing with elemental fire, and they had largely succeeded. Around that time, Masaki Shiratori, Japan’s executive director at the World Bank, lobbied passionately for a study of East Asia’s unusual success, its unique and savvy combination of deft government promotion of markets.

The World Bank came up with one–350 pages long–that hesitantly concluded that “market-friendly state intervention” might sometimes work. But it was so heavily hedged that it had little impact. Washington didn’t want to risk turning countries like India into government-supported export giants with East Asian-style policies, especially when U.S. markets were already seen as being under assault and Clinton was preaching “jobs, jobs, jobs.” And U.S. policymakers didn’t want countries like Russia to find excuses for only half-reforming their way out of command economics.

Mainstream economists rolled out their big guns against the idea that East Asia had a viable alternative. In a 1994 Foreign Affairs article, “The Myth of Asia’s Miracle,” Paul Krugman argued that pouring all that capital into industry at home was only going to yield “diminishing returns” and compared the Asians to the Soviet Union, saying that people forget “how impressive and terrifying the Soviet empire’s economic performance once seemed.” Krugman cited in particular the work of economists Alwyn Young and Lawrence Lau, who argued that East Asia’s “total factor productivity” numbers showed East Asian economic growth was entirely based on “inputs” such as rapid labor force increases, not on improved efficiency. It was merely “economic growth on steroids,” Young told me in an interview for Institutional Investor magazine in 1993. “You look impressive, but inside you’re rotting.”

For better or worse, a new global economic consensus is being born, if rather painfully.

Young and others pointed to Japan’s slow-growth period as evidence of this, but he and other economists failed to take into account the ultra-long time frame of the East Asian model–the fact that these countries were laying the institutional groundwork for later improvements in productivity and efficiency. And all the while neoliberalism was being slowly undermined by the departure of U.S. capital for foreign shores, along with cheaper labor. What the Clintonites and their advocates failed to see was that “[a]s capital becomes internationally mobile, its owners and managers have less interest in making long-term investments in any specific national economy–including their home base,” Robert Wade–then a renegade World Bank economist–argued at the time.

Wade and others were, of course, ignored. The historical tide of neoliberalism was too powerful, and the Japanese too meek about asserting their views. Japan, as ever, was bad about “forming universal theories from the economic success of Japan,” Naohiro Amaya, one of the country’s legendary bureaucrats, told me in 1992 when I lived there. It was a culture of pragmatism; the Japanese had no Keynes or Marx of their own. And frankly, few bureaucracies were as savvy as those of the East Asians, with their agile technocratic class and Confucian tradition of service. India, for example, which had grown up with Nehru socialism, had suffered for decades under the “license raj,” which involved a bureaucratic tangle every time someone wanted to start a business.

Yet much of this long-entrenched economic “wisdom” is now cracking–much like the melting glaciers that neoliberal capitalism, during its rampage across the planet, has helped to promote. As Cherif and Hasanov write in “The Return of the Policy That Shall Not Be Named“: “Our summary of 50 years of development showed that only a few countries made it from relative or absolute poverty to advanced economy status,” giving rise to the idea that government can’t make much of a difference. East Asia proved that it could, but “until recently, the experiences of the Asian miracles have been mostly considered as ‘accidents’ that cannot and should not be emulated, at least from the point of view of standard development economics.”

That is no longer the case. For better or worse, a new global economic consensus is being born, if rather painfully. As John Maynard Keynes wrote in the preface to The General Theory of Employment, Interest, and Money: “The difficulty lies, not in the new ideas, but in escaping from the old ones…”