GOVT2117 Lecture 3: Week 3_
17 Jan 2019
School
Department
Course
Professor
Week 3: The Politics of Economic Development II: State- and Market-Led Development (Aug. 10)
Chalmers Johnson, “Political Institutions and Economic Performance: The Government-Business
Relationship in Japan, South Korea, and Taiwan,” in Frederic C. Deyo, ed., The Political Economy of the
New Asian Industrialism
(Ithaca: Cornell University Press, 1987), pp. 136-164.
Daron Acemoglu and James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity, and
Poverty
(New York: Crown Publishers, 2012), pp. 7-9, 45-63, 70-87, 102-110, 113-117, 274-282.
-in 1950 measured in 1974 U.S. dollars, South Korea had a per capita income of $146; equivalent figures were
$150 for Nigeria , $129 for Kenya and $203 for egypt.
-Taiwan was then slightly ahead of Korea at $224 but lagged far behind Brazil at $373, let alone Mexico at $562 or
Argentina at $ 907 Nigeria’s was $670 (even with oil), Kenya’s $380 and egypt’s $480.
-In 1980 the per capita income of the republic of china was $2, 230; brazil’s was $1,780, mexico’s $1, 640, ad
argentina’s $2,230.
- To take only the two decades of high-speed growth in Korea (1962-80), GNP (expressed in 1980 prices)
increased 452 percent, from $12.7 billion to $57.4 billion, achieving an average growth rate of 8.5 percent per year.
-With regard to Taiwan, during 1982 the London economist noted ruefully “the 130 million brazilians export only
about as much as the 18 million people of Taiwan and (outside oil) the 75 million Mexicans-through they sit on
America’s doorstep export only a quarter as much as the Taiwanese
-And Taiwan and Korea were only the fourth and fifth richest countries in East Asia; the leaders were Japan, with a
1980 per capita GNP of $8,870, Hong Kong with $4,432, and Singapore with $4,298
Issues: roles of governments of South Korea and Taiwan played in contributing to their economies’ extraordinary
growth rates and the relevance of these recent economic “miracles” to the earlier and widely acknowledged one
achieved by Japan.
-”Taira’s enigma” -writing in 1982, professor Taira Koji observed: “Japan’s modern economic growth is believed to
have begun in the late 1980s, curiously coinciding with the preparation and promulgation of the Meiji Constitution
which defined the character of the Japanese state...the combination of an absolutist state with a capitalist
economy from 1889 to 1947 has been an enigma, far from fully unraveled, among scholars interested in Japanese
economic history”
Reasons:
-Since 1947 despite its adoption of a formally democratic constitution and the subsequent development of a
genuinely open political culture, Japan seems to have retained many ‘soft authoritarian’ features in its
governmental institutions: an extremely strong and comparatively unsupervised state administration, single-party
rule for more than three decades, and a set of economic priorities that seems unattainable under true political
pluralism during such a long period.
-the post-1947 period witnessed even greater rates of Japanese economic growth, it has seemed to some that the
coincidence of soft authoritarianism in politics and capitalism in economics had something to do with economic
performance.
-Japan’s achievement of the status of the second most productive economy that ever existed is no longer simply
an enigma; it is a challenge to the main political and economic doctrines that currently dominate global thinking
about human social organisation
-japan’s performance challenges the leninist command economies bc it calls into question their theory that
capitalism capitalism leads to class antagonism and political instability, and it also suggests that their resort to
explicit absolutisms without capitalism is misplaced and doomed to failure.
-japan’s performance also challenges the anglo-american “free enterprise” economies bc it calls into question their
theory that governmental intervention in the economy is inevitably inefficient and distorting and it also suggests
that their faith in the market mechanism without explicit political direction is misplaced.
Culture
-the most common theme in the alternative view is that Japan’s economic achievements are to be explained by
Japan’s unique culture, often traced back to sociological change during the Kamakura military government of the
13th century of even earlier.
-of course of that were true then the culture is also responsible for the two-and-a-half-centuries of sakoku (closed
country) during the Tokugawa era, for the militarism and imperialism of the 1930s and for the defeat of 1945.
-Korea and Taiwan are “hard states” (according to Leroy Jones and Il SaKong and in economic affairs,
“government at least in Korea is the senior partner”
-These new cases of absolutist states and capitalist economies suggest that there may indeed be a japanese
model that the Koreans and Taiwanese have been refining and perfecting. Japanese always prefer to stress the
superficial in their own case, shielding the intrinsic from foreign gaze. -it may turn out the real japanese
contribution lies in the method of operating soft authoritarian side of the capitalist developmental state-the
japanese have been much more effective on this score than either the Koreans or the Taiwanese-whereas Japan’s
unique labor relations and innovative managerial techniques, staples of western journalism on the Japanese
economy, may actually be insignificant and even counterproductive bc they are missing from Korea and Taiwan
with no noticeable effect on economic performance.
-Writing for the world Bank, Parvez Hasan notes “the apparent paradox that the Korean economy depends in large
measure on private enterprise operating under highly centralized government guidance.
-In Korea the government’s role is considerably more direct than that of merely setting the broad rules of
the game and influencing the economy indirectly through market forces.
-the gov is a participant and often the determining influence in nearly all business decisions.
-Hassen suggests that part of the solution to this paradox is the existence of mass nationalism in Korea and a
widespread public-private agreement on economic goals, thus eclipsing the class or pluralist pressures
on government that are commonly encountered in less mobilized societies.
-the issue of the national mobilization of a united people for economic goals is an important challenge to economic
theories based on class analysis, which have proved to particularly sterile in postwar east asia when used as a
guide to policy formulation (notably in mainland china)
But what is the apparent paradox that Hasan sees in an intrusive government and high-speed economic growth?
-the thought that although the high-growth Asian economies are strongly influenced by their governments, their
successes are to be explained not bc of this influenced but in spite of it. -many ignore the role of government in the
capitalist developmental cases. Thus, for example Milton and rose Friedman: “malaysia, singapore, Korea,
Taiwan, Hong Kong and Japan-all relying extensively on private markets- are thriving...by contrast, india,
Indonesia and communist china, all relying heavily on central planning, have experienced economic stagnation.”
-it ignores President Park Chung Hee’s intent to attain economic self-sufficiency for Korea through the
establishment of a planned economy. Taiwan’s repeated justification of its policies in terms of Sun Yat-sen’s semi
socialist principle of “people’s livelihood” and singapore single-party socialism that works
-The tendency to downplay the role of government has been most pronounced in the Japanese case, particularly
after the onset of so-called economic liberalisation in the late 1970
-In japan today it is commonly argued that even if the government once performed important roles in the economy,
it no longer does (thereby dichotomising the issue of governmental intervention instead of stressing the
government’s changing role in light of new economic challenges).
-Many believe japanese entrepreneurship always was more important to economic growth than any policies or
government practises. The economist’s survey of Japan for 1983: “foreign competitors exaggerate the importance
of MITI (ministry of international trade and industry) in shaping Japan’s industrial future...Japan’s major
manufacturers are laws largely unto themselves-especially when it comes to investment...it is this, rather than any
carefully aimed ‘industrial targeting’ policy on MITI’s part, that has been largely responsible for the surge in
Japanese exports that has been sweeping across America and Europe lately.’
-ever since the catch phase ‘Japan inc’ was invented to refer to the Japanese government-business relationship,
writers on the subject have found it de rigueur to misinterpret it to mean Japanese government domination of the
economy and then to demolish it. -but Taira’s enigma, with regard to Japan or the role of government in Korea and
Taiwan does not imply domination; it refers explicitly to the coexistence of authoritarianism and capitalism
-the logic of the capitalist developmental state: approached from the point of view of socialist theory. If one posts
the existence of a developmentally oriented political elite for whom economic growth is a fundamental goal, such
an elite must then develop a concrete strategy for attempting to reach that goal. If such an elite is not committed
first and foremost to the enhancement and perpetuation of its own elite privileges (something that cannot be
assumed in leninist systems or for that matter in the philippines) and that the elite appreciates that the socialist
displacement of the market threatens its goals by generating bureaucratism, corruption, loss of incentives and an
inefficient allocation resources, then its primary leadership task is to discover how, organizationally, to make its
own developmental goals compatible with the market mechanism (this is which such things as prices that are real
measures of value, private property in theory and in practise and decentralised decision making)
-developmental elites are generated and come to the fore bc of the desire to break out of the stagnation of
dependency and underdevelopment; the truly successful ones understand that they need the market to maintain
efficiency, motivate the people over the long term and serve as a check on institutionalised corruption while they
are battling against underdevelopment.
Eg: the republic of Korea p 140
-The rapid economic growth that began in South Korea in the early 1960s and has accelerated since then has
been a government-directed development in which the principal engine has been private enterprise.
-The relationship between government committed to a central direction of economic development and a highly
dynamic private sector that confronts the planning machinery with a continually changing structure of economic
activities presents a set of interconnections difficult to penetrate and describe.
-planning in South Korea if it is interpreted to include not only policy formulation but also the techniques of policy
implementation, is substantially more than indicative.
-the hand of government reaches down rather for into the activities of individual firms with its manipulation of
incentives and disincentives- at the same time, the situation can in no sense be described in terms of a command
economy.
-indispensable element in any model of the capitalist developmental state the commitment by the political elite to
“market-conforming” methods of intervention in the economy.
-Lim Youngil: he argues that Korean government planning, target setting, and incentive measures have been
market sustaining rather than market repressing and that it is necessary to distinguish between
market-augmenting planning (reducing risks and uncertainties) and market-repressing planning (increasing
fragmentation of the market or rent-seeking opportunities).-the former accelerates development while the latter
