Since the demise of the communist regimes in Eastern Europe, policy makers and policy analysts in these “transition” states have resolutely avoided learning from East Asia’s development experience. Instead, they have looked westward, seeing the causes of the prosperity of Western Europe and North America through the lens of “liberal” economics. However, radical liberalization may turn out to be a dangerous route which in the end may yield immiserizing growth. Governments of East European Countries should therefore study more open-mindedly the East Asian experience, the developmental state, and the practice of “governing the market.” Public authorities there have intervened to alter the composition of economic activity within their borders, in line with an economy-wide exercise in foresight about the economy’s future growth, in the context of a capitalist economy. Against the mainstream economic explanation of catch-up growth, in East Asia trade liberalization followed after the countries had become richer. Industrial policy was one important strategy for fostering growth, including three types of intervention: (i) economy-wide “functional” policies, including exchange rate policies, macroeconomic balance, and competition policies; (ii) multi-sectoral “horizontal” policies, including incentives for R&D, incentives for small and medium-sized enterprises, investment in port infrastructure, and so on; and (iii) sectoral policies, to promote specific sectors or sub-sectors or firms. Even today, in several East Asian countries the state continues to shape the composition of activity within its borders and does not “let the market take its course.” The government’s role is, in particular, to promote industrial complexes or “growth poles”; and to promote moves in many industrial and service sectors into higher value added parts of global value chains. There is also a body of theory supporting this strategy of “governing the market” in a developing-country context. Conventional economic analysis stresses that any attempt by public agents to change the composition of economic activity away from that which results from well-functioning markets is bound to be ineffective and to thwart the expansion of comparative advantage along whose path sustainable development lies. However, once the underlying assumption of perfect competition is replaced with an assumption of oligopoly – a small number of firms and barriers to the entry of competitors – the argument changes. In particular, when there are increasing returns to scale such that only some of many potential production sites can be established, and when there are learning-by-doing economies which give advantages to firms which establish production early, there is scope for states to shape and direct comparative advantage. These conditions occur frequently in the mid-tech industries of Eastern Europe and the mid-tech and high-tech industries of East Asia. The task for industrial policy strategists in identifying products or sub-sectors for targeting is not particularly difficult. In the end, the main obstacle to success lies at the level of norms: the legitimacy of efforts by public agencies to change the composition of economic activity.