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.     

The political economy of education and skills in South Korea: democratisation,liberalisation and education reform in comparative perspective

The success story of Korean economic development is intimately linked with the so-called developmental state; and education policy, as part of centrally orchestrated industrial policy, played a critical role in the country's rapid industrialisation, which allowed for high employment rates, relatively modest social inequality and remarkable social mobility. However, the Korean success story has started to show ‘cracks’ – with labour market dualisation, rising inequality and ‘over-education’. While acknowledging the importance of the East Asian financial crisis as external shock for the Korean political economy, we suggest more fundamental problems in the socio-economic and socio-political underpinnings of the developmental state and its education and skills formation system for understanding how Korea's economic and education miracle turned into ‘education inflation’, skills mismatch and social polarisation.     

Crisis management and the diversity of capitalism: fiscal stimulus packages and the East Asian (neo-)developmental state

Abstract

This paper contributes to the understanding of East Asian capitalism by investigating the political economy of crisis management in Japan, Korea and China during the global economic crisis. Reacting to the global shock of the economic crisis that began in 2008, East Asian capitalism has remained a distinct state-led model that differs substantially from the liberal, neo-corporatist or welfare state varieties of capitalism in the West. More specifically, this paper studies the fiscal stimulus packages implemented by East Asian countries to address the global financial crisis from 2008 to 2010. We find that East Asian fiscal stimulus packages were comparatively large and supply-side-oriented. Unlike in the West, where a (short-lived) revival of demand-side-oriented Keynesian strategies stimulating consumption could be observed, East Asian countries reinforced industrial policies and supported investment and international competitiveness. We argue that the East Asian variety of crisis management can largely be explained by a path-dependent transformation of the East Asian developmental state into a neo-developmental competition state.     

Political party and party system institutionalization in Southeast Asia: lessons for democratic consolidation in Indonesia,the Philippines and Thailand

Abstract

This article analyses the Kim Dae-jung government's industrial realignment (‘Big Deals’) policy in post-crisis Korea, which offers a valuable insight into the state's role in managing the transition from a developmental state to a free-market economy and into the changing nature of government–business relations. Although Kim was committed to creating a free-market economy in Korea, as the ‘Big Deals’ got under way critics accused him of violating market principles and employing tactics of intervention and coercion used by previous authoritarian regimes. The ‘Big Deals’ experience suggests a further stage in the evolution of the Korean developmental state; the dismantling of state powers and the implementation of neoliberal reforms in the 1990s had led to the emergence of a ‘transformative state’ in which the state acted as ‘senior partner’ rather than ‘commander-in-chief’. The transitional state charged with the task of rebuilding the economy after 1997 regained some of its lost powers and used some familiar methods of achieving its ends. However, it also demonstrated by the nature and scope of its interventions that it was gradually evolving and adapting to meet the changing economic environment. Although Kim's actions prompted allegations from the chaebol and their conservative allies of a return to autocratic economic management by the government, it was clear that the developmental state had not been resurrected. Rather, these criticisms serve to highlight the continuing antagonism in the state–business relationship; neither side had developed new strategies for dealing with each other and their relations were still characterized by mutual mistrust and staunch chaebol resistance to key reforms demanded by the government. Although suspicions of a permanent return to extensive state intervention were unfounded, they nevertheless diminished the prospects for the creation of a cooperative relationship between the state and big business that would be a crucial factor in revitalizing the Korean economy.     

Taiwan and the geopolitics of late development

Abstract

Through a case study of Taiwan, this paper seeks to address recent debates surrounding the transformation of developmental states in East Asia. Whilst a number of authors have cited the Taiwanese state as being both cautious and resilient in the midst of global restructuring, this paper seeks to critically engage with such arguments by highlighting the dynamic and mutually constitutive relations between the forms of social relations that underpin late development and the wider geopolitical system in which such development occurs. Specifically, Taiwanese industrialisation can be viewed as an outcome of the US intervention in the Chinese civil war and subsequent exclusion of China from the regional political economy in the period between the Korean and Vietnam Wars. The Kuomintang (KMT)'s retreat to Taiwan established the basis for the autonomous developmental state, and the US underpinned this state through military protection, aid and access to its own domestic market. However, the relative decline of US hegemony and the readmission of China into the international system have posed significant challenges to Taiwan's developmental state. The US sought to redress its trade imbalance with East Asia by placing pressure on Taiwan to liberalise its political economy. Furthermore, the very process of development itself served to undermine the autonomy of the state as it came under pressure from new social forces. Taiwan has more recently been faced with a dilemma of closer integration with the mainland or the maintenance of its de facto economic and political independence at the risk of becoming isolated from the global trading system.     

The Policy of High‐Tech Industry Development: The Case of Location Assessment for Biotech Industry Parks in Taiwan

Biotechnology will be the star industry of the 21^st century, and will also be one of the main focal areas of Taiwan's future industrial development. Many scholars have suggested that the presence of geographical clusters is an important factor that determines an industry's international competitiveness. As an example of the clustering effect, when high‐tech industry was just starting to take off in Taiwan, the establishment of the Hsinchu Science‐Based Industrial Park successfully promoted the upgrading of the industrial structure. The goal of this study is to explore the development of an industrial park location selection model for Taiwan's biotech industry, while considering the influence of the clustering effect, with the ultimate intent of promoting the industry's development. Because clustering factors are certainly not necessarily independent, and may entail a feedback effect, this study uses the analytic network process (ANP) multiple criteria decision‐making (MCDM) model to construct a “biotech park” location selection model, and then determine the optimal location of a biotech park from three alternatives. The results suggest that Taipei City would be the optimal choice for a biotech park. This finding can serve to guide the government's biotech industry development policies.     

State versus market: Taiwan’s trade, investment and aid policies in mainland China and southeast Asia in the post-Deng period

For many years Beijing has sought to isolate Taiwan from the world community, threatening to sever relations with any country that tries to establish or strengthen relations with Taiwan. As a result, economic diplomacy has become a tool in conducting Taiwan’s international affairs. Political and economic considerations are thus intermingled in Taiwan’s pursuit of its foreign economic policy. This paper does not intend to go into a traditional debate on the conflict between the state (politics) and the market (economics) in conducting a country’s foreign economic relations. Rather, it attempts to coordinate the merits of both state and market and assumes that an understanding of their interaction is useful in examining Taiwan’s foreign economic relations in the post-Deng period. The empirical study of this paper will focus on mainland China and the Southeast Asian countries. Southeast Asia is a region where no country maintains diplomatic relations with Taiwan. It is difficult indeed for Taiwan to develop official political ties with Southeast Asian countries because of their geographical proximity to mainland China, which tends to make them subject to pressure from Beijing. Thus, whenever Taipei conducts its economic communications (such as in foreign trade, foreign direct investment and foreign economic assistance) with mainland China and those Southeast Asian countries, political and economic factors are always taken into account by decision-makers.     

From Nationalization to Marketization: Changing Governance in Taiwan's Higher-Education System

The shift from "government" to "governance" has been widely debated both in the West, where the debate originated, and in the Asia-Pacific, where it is a strong emergent theme. In the West, early work concentrated on problems of government failure in the realms of regulation, welfare and development. This developed into a focus on the increasingly complex challenges facing modern states. By the mid-1990s, bodies such as the Organization for Economic Cooperation and Development (OECD) were devoting considerable attention to issues affecting "governance in transition." At this time, the United Nations Development Program (UNDP) issued its first discussion paper on governance. This emphasized the importance of bringing together the realms of governance, namely civil society, the state, and the private sector. All these developments signify a fundamental administrative paradigm shift to the "sociopolitical governance" model. This paper discusses the theme "from nationalization to marketization" by examining the origins and driving forces for changing governance in Taiwan's higher-education system. More specifically, the paper examines the changes in the role of the state in terms of three major aspects: provision, financing, and regulation in higher education, reflecting on how a new governance model has evolved in Taiwan.     

Beyond the Developmental State: The Cultural Roots of "Guerrilla Capitalism" in Taiwan

This article seeks to contribute to the emerging literature on moving "beyond the developmental state" by tracing the important role of "guerrilla capitalism" in Taiwan's political economy. The success of small and medium enterprises (SMEs) with little linkage to the state in Taiwan strongly suggests that more than state leadership must have been involved in the island's "economic miracle." The SMEs are quite important for the overall economy, especiaiiy the export sector where they have long accounted for more than half of total exports. Their success has resulted from the practice of "guerrilla capitalism" which includes aggressive and even audacious pursuit of business opportunities, extreme flexibility in rapidly filling even small orders, atten tion to quality and design, audacious bidding, participation in complex networks of subcontracting, and only partial observation at best of government regulations and international laws, such as those regarding intellectual property rights. The emergence of guerrilla capifalism, in turn, can be explained by the long-sfanding challenge in Chinese history to "official" Confucianism by a "heterodox counterculture" that is quite conducive to entrepreneurship and small-scale business activities.     

Governed interdependence: Rethinking the government‐business relationship in East Asia

Analyses of East Asia's high‐performance economies have highlighted the advantages of a coordinated approach to market failures. With states dominating the process, both public and private agencies are increasingly involved. The recent literature sees public‐private cooperation as a limit to state capacity and thus a challenge to statism. Within an institutionalist framework, this paper proposes a fresh view of the government‐business relationship which avoids the statist premise of domination, but without relying on ‘weak state’ arguments. Through an examination of key organizational features of state and industry in Korea, Taiwan, and Japan, the paper proposes a theory of ‘governed interdependence’ in which both state and capital are taken seriously; where both strong state and strong industry go hand‐in‐hand; and where the capacities of both are mutually enhanced. The article identifies four principal types of government‐industry cooperation in the East Asian experience — some apparently ‘state‐led’, others apparently ‘business‐led’ — all of which can be accommodated by the theory.     

The Developmental Roles of the State: Moving Beyond the Developmental State in Conceptualizing Asian Political Economies

This article examines the role the state has played in the development of a variety of Asian nations through a series of "paired comparisons" to evaluate the model of the developmental state that has become prevalent in the analysis of East Asian political economy. The cases included in the study indicate that neither the state nor the market (as argued by neoclassical economists) can explain developmental outcomes by itself. Too many strong and interventionist states succeeded to gainsay the idea that economic competitiveness can be manipulated. However, the statist faith in strong and autonomous developmental states does not fare very well either. Strong states failed as well as succeeded. In fact, the strongest and most autonomous states may well be in the greatest danger of degeneration because they can resist pressures for change and can use their powers to become a "predator" over society. In addition, quite a few of these mini case studies directly imply that the nature of society is an important variable in deter-mining how well a political economy operates. Thus, the case for "bringing society back in" appears to be a strong one.     

Exam‐centred Meritocracy in Taiwan: Hiring by Merit or Examination?

As a legacy of Imperial China, the Taiwan civil service entrance examination (CSEE) represents the hallmark of a unique exam‐centred meritocracy, in which government agencies and public managers are deprived of selection power. This system diverges from the trend of managerialism in Anglo‐Saxon countries. This paper argues that the evolution of meritocracy in Taiwan has been built around the CSEE and has contributed to a top‐down state‐building approach. The current system is a product of a long‐term power struggle among the Examination Yuan, government agencies, and civil service examinees. In contrast to the popular framework of patronage versus merit, the policy debate in Taiwan is better framed as whether or not recruitments are made on the basis of competitive examination. The value of ‘equality’ is upheld at the expense of the value of ‘competence’.     

China: an East Asian alternative to neoliberalism?

The political-economic evolution of post-Mao China has been portrayed as a historically inevitable embrace of neoliberalism; as an exemplification of the East Asian developmental state and as an extension of Soviet New Economic Policy-style state capitalism. This paper evaluates these portrayals through a broad historical and geographical framework. It examines the position of China as a new state after 1949. It then places the shifting logics of socioeconomic regulation in China in relation to (1) the global neoliberal hegemony since the 1980s and (2) the concomitant shifts in the economic policies of Japan, South Korea and Taiwan. In so doing, the paper demonstrates how the Communist Party of China creatively adapted and re-purposed regulatory logics from the Washington Consensus and East Asian policies to consolidate its own version of Leninist state-led development.     

Eclipse or reconfigured? South Korea's developmental state and challenges of the global knowledge economy

Abstract

Globalists and former students of the Asian developmental state maintain that the latter has succumbed to the forces of globalization. They believe that the global knowledge economy involves the thorough integration of the global economy, continuous innovation and networks rather than hierarchies and that these factors are foreign to the operational logic of the developmental state and thus render it obsolete. This article contends that the global economy is not as open as supposed, and that the challenges posed by the knowledge economy, while genuine, tend to be uneven. Focusing on Korea's information technology sector and relying on documentary and interview data, the present article suggests that, while the Korean state no longer relies on its erstwhile finance and regulation strategies, it has continued to articulate development visions and sought to achieve them through deploying public resources to structure the market. Rather than going into eclipse, the Korean developmental state has been reconfigured.     

East asia and cross-Taiwan strait relations

The evolution of the Taiwan issue has been closely linked to the interaction of China and other countries including Japan, Russia, and especially the United States. It is important to examine the great power interaction in East Asia and its effect on the cross-strait relations. Japanese policy toward the Taiwan issue will be a critical indicator of the nature of Sino-Japanese relations. One issue is Japan’s expanding role in the U.S.-Japanese security relations and the implication of such relations for East Asian security. Russia has consistently supported Beijing’s policy on Taiwan. Since the return of Hong Kong to China on July 1, 1997, the policy of “one country, two systems” has been put into practice. If Hong Kong can continue to enjoy a high degree of autonomy and prosperity, valuable lessons might be gained for resolving issues in cross-Taiwan Strait relations.     

State intervention and neoliberalism in the globalizing world economy: lessons from Singapore's regionalization programme

The recent 1997-98 Asian economic crisis has thrown Asia's divergent pathways to development into serious question. Protagonists of neoliberalism argue that their agenda is now becoming a global orthodoxy when several ailing Asian economies have accepted IMF packages which come with neoliberal economic programmes. Drawing on lessons from Singapore's regionalization programme, this article contends that it is far too early to conclude that Asian developmental states are giving up their governance of domestic economies. Instead, there is evidence that these Asian developmental states are re-regulating their domestic economies to ride out of the economic crisis. The article first starts with the debate between neoliberalism and state developmentalism in our understanding of global political economy. It then examines the political economy of Singapore's regionalization programme through which Singapore-based transnational corporations are strongly encouraged by the state to regionalize their operations, followed by a critical discussion of the impact of the recent Asian economic crisis on the re-regulation of the regionalization programme by the state in Singapore. Some lessons for Asian emerging economies are suggested in the concluding section.     

Against the economic orthodoxy: on the making of the East Asian miracle

With an eye on the transition from socialism to capitalism in Central Europe and the decline of industrial economies such as Britain, the article contributes to the debate on the economic development of Japan and the newly industrialized countries of East Asia. It begins with a discussion of the reasons why accounts derived from neoclassical economic theory have dominated explanations of industrialization in the region. By reference to three recent books on the development of South Korea, Taiwan, Hong Kong and Singapore, the article proceeds to mount a critique of the economic orthodoxy, arguing for a central role to be accorded to state influence and direction over the economy. The article ends by suggesting that there are a number of elements in the East Asian model of development that could be creatively appropriated to inform strategies for economic rejuvenation elsewhere in the world.     

Urban government and market reforms in China

Chinese reformers wish through their economic programme to create a new form of developmental state in China and a new relationship between state and economy. This paper examines these issues through a study of the impact of Chinese economic reforms on the structure and behaviour of local government, focusing on urban government at the district level. It looks at three aspects of the issue—the trend towards financial decentralization, institutional changes in district administration and changes in the relationship between local government and the urban economy. It concludes (contrary to arguments which regard bureaucratic response to the reforms as one of pure inertia and obstruction) that urban local government has changed in several major ways, the most obvious being a trend towards institutional expansion and proliferation. From the point of view of the reform process, some institutional changes have been positive, others negative, resulting in a ‘dualistic’ state which contains elements of both old and new forms of developmental state. There is a need for systematic analysis of the specific future needs and evolution of China's urban government which would guide a process of politico-administrative reform comparable to the current economic reform.     

Scotland’s Faltering Green Industrial Revolution

Renewable energy has long been central to SNP policy making and Scottish independence. During the 2014 referendum, green electricity generation was presented as a means for Scotland to achieve ‘reindustrialisation’. Despite a world‐leading transition in electricity supply, the Scottish government has struggled to develop renewables manufacturing. Scotland’s largest offshore engineering company, BiFab, entered administration in 2020. This article explains the faltering of Scotland’s green industrial revolution. First, it assesses renewables’ privileged place in SNP perspectives, underlining its deep roots in North Sea oil and criticisms of British governments’ mismanagement of offshore opportunities. Second, the failure of market‐led policy making to provide the anticipated industrial benefits from offshore wind developments is explained through the domineering role of foreign state‐owned enterprises and global supply chains in the UK’s renewables sector. The conclusion argues that older nationalist perspectives offer remedies, but these require a more active industrial policy that diverges from the current approach of the Scottish Government.