Chapter 1 introduces the theory of the middle-income trap and establishes Malaysia as a critical case study for understanding how “ordinary” countries—unlike East Asia’s elite high-performers—can achieve sustained economic development. It examines the economic mechanisms that cause growth rates to decline at middle-income stages, including diminishing returns to capital investment, the challenge of transitioning from factor-input-driven to productivity-driven growth, and the failure of industrial upgrading due to inadequate infrastructure, human capital, and research and development (R&D) capacity. The chapter also analyzes the political and institutional dimensions of the trap, particularly how ethnic diversity, social divisions between formal and informal workers, dependence on foreign direct investment, and authoritarian governance structures can impede the formation of broad “upgrading coalitions” necessary for countries to advance from middle-income to high-income status.