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Development Strategies. Evidences from East Asia. Developmental state. Paradigm of developmental state in development economics and comparative political economy mostly bred by experiences of Japan and NIE’s from 1960s to 1980s choice of efficient, coherent, and flexible economic policies
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Development Strategies Evidences from East Asia
Developmental state • Paradigm of developmental state in development economics and comparative political economy • mostly bred by experiences of Japan and NIE’s from 1960s to 1980s • choice of efficient, coherent, and flexible economic policies • effective implementation
Developmental state • place top priority on economic development • growth, productivity, and competitiveness • actively intervene in market • guide, discipline, and coordinate private sector • strategic allocation of resources • use of diverse policy instruments • rational and competent bureaucrats • insulated from political pressures
Paradigm • Departure from traditional neoclassical development strategies • government intervene only to correct market failure • “Washington consensus” of US Treasury, IMF, and World Bank • free market, free trade, free capital mobility, and limited government
Paradigm • Deviation from “dependence” school of thought • integration into the international capitalist division of labor • developing economies at the periphery depend on developed economies at the core • developing economies are denied the opportunity for self-sustained growth
Incomplete conceptualization • State is not an internally cohesive and unitary actor • divisions within executive leadership • executive-bureaucracy relationship • inter-bureaucracy conflicts • State-society relationship • bureaucrat-constituent links
Problematic premises • Insulated bureaucrats make rational policies • often not insulated: under political pressures • often not rational: politicized • Efficient, coherent, and consistent policies • State policies determine economic performance and outcomes • supply-side factors, demand-side conditions, corporate structure and strategy, luck, etc.
Network theory • Developmental state is embedded in society • functional links • exchange of information • Policies result from interactions • interdependence of private sector and state • intermediate organizations • State and private sector merged into an internal organization
Problems solved and created • Networks are dynamic • Networks create opportunities for corruption • Networks are not naturally efficacious and benign • What factors lead to dysfunctional and malignant networks?
Case study 1 • Hong Kong and Singapore • both are entry ports to mainland • both are former British colonies • both are mostly ethnic Chinese societies • Profoundly different development strategies • But, both invested heavily in human capital and public spending to enhance international competitiveness
Case study 2 • Hong Kong and the Philippines • both are “weak” states • difference in economic performance • A weak state • doesn’t necessarily lead to free market • can be dominated by powerful economic interests • creates opportunities for powerful economic groups to manipulate and distort economy
Dependency theory • International capitalist economy • exploit weak third-world countries at the periphery • perpetuate poor nations’ dependence on rich nations at the core • Multinational corporations and foreign capital play significant role in the economies of Hong Kong and the Philippines, with different consequences
Case study 3 • South Korea and India • both states are strongly committed to promoting economic growth • both states had significant intervention in the industrialization • India was one of the first states in the developing world to produce a detailed development plan (1952)
Restriction on foreign capital • South Korea and India • both states restrict multinational corporations and foreign capital • different economic outcomes • protection of domestic industries • build up efficiency of domestic firms • increase competitiveness of domestic firms
Different strategies • Import-substituting industrialization • tariff and non-tariff barriers to protect domestic industries • Export-oriented industrialization • selective protection and free trade regime • State intervention in financial and labor market • State-owned enterprises
Case study 4 • Firm size & competitive strategy • Hong Kong and Taiwan • small and medium enterprises • China’s mainland • township and village enterprises • South Korea and Japan • large integrated conglomerates
