The limits of economic globalization in East Asian developmental states

Abstract

In an attempt to adjust to economic globalization or internationalization, East Asian developmental states have liberalized their domestic economic systems, accelerating the introduction of the free‐market ideology. Despite their plan to establish the internationally compatible open‐market economy, however, the extent to which they can advance economic liberalization is limited. Political and economic burdens that the developmental state's extensive intervention in the market has incurred in the course of state‐led mercantile economic development, make it impossible for those states to execute full‐scale economic liberalization. The South Korean case clearly shows this. The Korean developmental state retains two major economic burdens: the exclusive ownership and the poor financial structure of the chaebôl. Insofar as Korean big business preserves those weak spots, the government cannot surrender the power of regulation despite its spontaneous implementation of the economic liberalization policy. In addition, the common ‘egoistic’ interests which government bureaucrats and the political class share also limit the degree to which economic liberalization policy can be implemented. The degree of state intervention in the market in Korea has been deeper than that in Japan which pioneered Asian developmental statism, and, thus, the political and economic burdens it has incurred for itself are heavier. Consequently, the East Asian developmental state cannot entirely withdraw its intervention in the market. The ‘support’ of industries is likely to diminish, but ‘regulation’ for the formation of the autonomous market will increase. For the Korean developmental state, globalization and economic liberalization are political economic slogans to re‐launch economic growth and to elevate the international economic competitiveness of industries under the initiative of the state, and motivated by nationalistic reasons. Hence, the role of the state in the market is still far from becoming redundant even in the tide of globalization and economic liberalization in the case of South Korea, where the legacy of strong developmental statism remains considerable.     

Challenges to the East Asian environment

Abstract

Can economic interdependence reduce conflicts among states in East Asia? The so-called ‘cold politics and hot economics’ has become a defining feature of Sino-Japanese political-economic relations. This puzzling pattern of interaction is clearly illustrated in the sovereignty dispute over the Senkaku/Diaoyu Islands. The island dispute has unfolded in five rounds of distinct clashes thus far. From one perspective, the competitive elements in the island dispute make it difficult for both Japan and China to give way to the other side on the territorial and maritime issues. At the same time, the two countries have successfully managed to contain their respective territorial and maritime claims thus far. Drawing on the liberal peace theory, this article systematically demonstrates that economic interdependence has repeatedly fostered the de-escalation of Sino-Japanese conflict over territorial and maritime rights.     

Asian multilateral institutions and their response to the Asian economic crisis: the regional and global implications

Asian multilateralism has been a relatively recent development. It differs from that elsewhere and reflects the history and characteristics of the region. It has been important in the growth of regional cooperation, in developing common regional interests and in the development and adherence to norms. These characteristics contributed in responding in a constructive, if limited, way to the Asian economic crisis. Nevertheless, the crisis has revealed the weaknesses of existing regional multilateral institutions and those weaknesses are often seen as raising doubts about whether those institutions can be effective in the future without major reform. Yet, although the response of the regional institutions was clearly inadequate, the region's response overall was far from negligible. Efforts to ensure regional coherence in the future by way of ASEAN, APEC and ASEAN+3 in particular are already being made to ensure greater stability in the financial sector. The region also wants to overcome its under representation in the global arena, but increased global participation, while positive, will remain supplementary to the global institutions, notably the IMF. Greater global involvement would provide, however, a more appropriate balance between regional and global contributions to future crises, since they will need to be better tailored to regional conditions and therefore depend on greater regional involvement from the start.     

Response and responsibility: China in East Asian financial cooperation

Abstract

China's behaviour in East Asian financial cooperation has overall changed from passively responding to external pressures to taking proactive initiatives, which are highlighted by Chinese elites as evidence of a sense of responsibility. China has taken varied positions towards proposals for Asian financial regionalism, from ‘silent’ objection, to lukewarm or superficial support, to enthusiastic participation and substantial contribution, and this variance has not always taken place in a chronological order. Despite much speculation over the trajectory of China's role in East Asian regionalism, there has not been a study focused on China's policymaking towards East Asian financial cooperation. Therefore, this paper fills the gap by analysing the factors and policymaking processes that have led to those varied positions. It argues that China, recognising the momentum in the region to enhance cooperation, has replaced the blunt dismissals of proposals, particularly those from Japan, with a more subtle approach that is aimed at ensuring China's influence and promoting the image of a responsible great power; that the extent to which it can contribute to this process is mainly constrained by its economic conditions, particularly the financial institutions.     

The project orthodoxy in development: Re-evaluating the cutting edge

This paper takes a broad critical posture towards the project as an instrument of development. It addresses the multidimensional features of what has become the project orthodoxy in development management, and some of the attending effects. It suggests that some of the virtues of the project have been offset by a number of negative consequences as it has become institutionalized in the procedures of both donor agencies and national governments in developing countries. An attempt is made to distinguish between those kinds of activities in which the project mode is most useful, and those for which its basic features and attendant trappings have great limitations. The argument concludes with a reassertion of the need for better linkages with programme management and the sources of policy.     

Review Article: Don't Discard State Autonomy: Revisiting the East Asian Experience of Development

Rapid East Asian economic growth was commonly credited to the existence of strong, autonomous developmental states. Subsequently a new 'institutionalist' school of thought emerged which argued that an effective state must be connected to civil society, not autonomous from it, and which reinterpreted East Asian development in these terms. This paper is a critical reappraisal of the institutionalist school. The evidence of state autonomy (seen in relativistic rather than absolute, either-or terms) in East Asia's recent history is too great to be ignored. And since some institutionalists themselves acknowledge autonomy as a necessary foundation for developmentally effective relationships with civil society, we should recognize autonomy as a potentially important element of state capacity. State autonomy remains an important analytical concept that deserves the attention of scholars.     

Of paradigms and power: British economic policy making since Thatcher

How do ruling policy paradigms persist over time and why do they often undergo significant internal ideational changes? While the impact of Peter Hall's approach to policy paradigms on the study of governance has been immense, there is a burgeoning consensus that a “Kuhnian” understanding of paradigms makes punctuated equilibrium style shifts the only game in town. While Hall's approach can account for inter‐paradigm change with reference to exogenous shocks, it does not allow for significant ideational shifts to occur intra‐paradigm. To remedy this, we place ideational power dynamics at the heart of the study of policy paradigms. We demonstrate the general applicability of our approach by examining the evolution of British macroeconomic policy‐making since 1990. We show how key policy‐makers were able to employ their institutional and ideational power to reinterpret and redefine the dominant neoliberal understanding of the economy to match their own specific ideas and policy priorities.     

National financial structures,capital mobility,and international economic rules: The normative consequences of East Asian,European, and American distinctiveness

In addressing the relationship between the structures of national financial markets, capital mobility, and the rules governing international trade and investment, this article combines theory and policy. Focusing mainly on the United States, Germany, and Japan, it first draws together themes and suggestive evidence from diverse bodies of research on international capital mobility and national financial structures. On this basis, it argues that, notwithstanding the increasing mobility of capital, asymmetries in those structures persist and have important consequences for the rules of the international economic game as they are now evolving. The article then looks more deeply at East Asia, the region that appears to be presenting the clearest challenge to existing international rules. In its conclusion, and in light of that challenge, the article discusses the agenda that confronts researchers and policy-makers as they attempt to assess and re-calibrate rules to govern the more complex international economy of the 1990s and beyond.     

Japan's leadership role in East Asian security multilateralism: the Nakayama proposal and the logic of reassurance

Abstract

United States’ foreign policy towards the Asia-Pacific region is set to be fundamentally altered by two developments in Washington's defence policy. The first is the so-called pivot towards the region in terms of overall defence strategy. The second, occurring at roughly the same time, is a move towards a far greater role for advanced conventional weaponry in the US defence posture. We analyse the interaction of these two trends and discusses a central tension between short and long-term challenges, suggesting that, contrary to current developments, either a freeze in the deployment of these weapons programmes or a return to a strategy underpinned by traditional notions of deterrence may well be necessary.     

Economists and economic policy making in Israel: The politics of expertise in the stabilization program

This study analyzes the involvement of economists in the making of Israel's stabilization policy of 1985. The economists who participated in the policy process are conceptualized as political actors engaged in a struggle over material and symbolic resources, and their impact in the polity process is related to their definition of policy outcomes as political assets to the profession.     

South Korea and Sino-Japanese rivalry: a middle power's options within the East Asian core triangle

Abstract

South Korea is a middle power in a region where its scope of action can rise and fall quickly and diplomatic flexibility is needed. Neither realist responses to threats nor idealist trust in integration meet its needs for adjusting triangular ties with China and Japan, as their relations become the principal great power divide in Northeast Asia. Its optimal choice is as a facilitator biding its time when tensions over both security and national identity clashes are intense, while preparing for opportunities. Four conditions would give it a favorable environment: forward-looking foreign leadership; security challenges brought under some control; subsiding preoccupation with national identities; and its own strategic planning with care not to overreach. Multiple possibilities emerge if it can rebuild ties with Japan as part of a triangle with China as well as one with the United States and also synchronize ties with China to other ties. Even amidst recurrent tensions, the core East Asian triangle offers Seoul a chance to take advantage of changing dynamics in the world's most ascendant region.     

Foreign aid in the making of economic policy in Sri Lanka, 1977–1983

The paper analyzes the interaction between inflows of foreign aid and the character of the economic policies pursued by the Sri Lankan government between 1977 and 1983. Aid did not support the policies of liberalization and balanced public investment that were preferred by donors. Rather it enabled the Sri Lankan government to push forward with the Mahaweli irrigation scheme on a scale that worked against both liberalization and other components of public investment. The process that led to the adoption and funding of the Mahaweli scheme and continued support for that scheme even after its impact on the overall economic program had become apparent is examined in detail, with particular emphasis on the decisions and behavior of both the Sri Lankan government and of aid donors.     

Perceptions,fear, and economic loss: an application of prospect theory to environmental decision making

Most of the analysis of costs associated with the introduction of risky prospects has concerned contingent costs amenable to insurance programs. An important missing element is the current cost associated with changes in uncertainty. These costs are not amenable to insurance plans and require compensation in order to prevent transfers. In a novel approach, this paper develops an application of prospect theory to such questions, in an intergenerational context. The importance of such an application is demonstrated in a case study of the high-level nuclear waste repository (HNWR) siting decision. As a case study, the costliness of obtaining some elements of the analysis leads to a simulation approach, comparing prospect costs at the three sites that were under consideration by the U.S. Department of Energy. Finding that such costs can be large, we argue for a reassessment of current risk analysis approaches. On a policy note, on the basis of the prospect cost analysis here, the choice of the Yucca Mountain, Nevada, HNWR site seems ill-advised.     

Understanding Economic Development and Institutional Change: East Asian Development Model Reconsidered with Implications for China

This paper presents a coherent framework to characterize the dynamics of economic development and institutional change in the East Asian Development Model. In the early stage of development, due to market incompleteness, a government with high autonomy and capacity can promote economic development through interlinked and relational arrangements (e.g., industrial policy). In later stages, market completion will usually unravel interlinked and relational contracts, and lead to a rule-based society. The paper shows that the appropriate role of government and institutions are functions of the stage of development. In particular, relation-based governance is suited to investment-led development, while rule-based governance is suited to innovation-led development. The paper ends up with some implications for China’s development and institutional change.     

Huang Chin-Hao and David C. Kang,State Formation through Emulation: The East Asian Model

Journal of Chinese Political Science -