Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-06T09:47:36.716Z Has data issue: false hasContentIssue false
  • English
  • Français

State structure and economic adjustment of the East Asian newly industrializing countries

Published online by Cambridge University Press:  22 May 2009

Yun-han Chu
Yun-han Chu
Affiliation:
Associate Professor of Political Science at the National Taiwan University, Taipei.
Get access

Abstract

An analysis of the economic adjustment policies of Hong Kong, Singapore, South Korea, and Taiwan during the 1970s and 1980s shows that these East Asian newly industrializing countries (NICs), which faced common problems in sustaining their recent industrial growth, responded to the challenge with industrial adjustment strategies that differed in their degree of intensity of state involvement and emphasis on national control. To explain this divergence in adjustment strategies, the article explores the variations in the national political structures of the four NICs and focuses particularly on three aspects of state structure: the organization of the economic bureaucracy, the institutional links between the state and private sector, and the larger state-society relations. The article demonstrates the usefulness of moving beyond the generalizations of the “developmental state” view by carefully disaggregating these aspects of state structure and by exploring the ordering logic that gives coherence to them.

Type
Articles
Information
International Organization , Volume 43 , Issue 4 , Autumn 1989 , pp. 647 - 672
Copyright
Copyright © The IO Foundation 1989

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. See Balassa, Bela, “The Lessons of East Asian Development: An Overview,” Economic Development and Cultural Change 36 (Supplement, 04 1988), pp. S273–90CrossRefGoogle Scholar.

2. On this point, see Yoffie, David B., Power and Protectionism: Strategies of the Newly Industrializing Countries (New York: Columbia University Press, 1983)Google Scholar.

3. For a similar but more elaborate analysis of the nature of adjustment problems facing the NICs, see Cheng, Tun-jen and Haggard, Stephan, The Politics of Adjustment in the East Asian NICs (Berkeley, Calif.: Institute of International Studies, 1987)Google Scholar.

4. For an interesting argument on why it becomes an increasingly limited policy option to help private producers overcome stiff entry barriers through administration of structural incentives alone, see Jacobsson, Staffan, “Technical Change and Industrial Policy: The Case of Computer Numerically Controlled Lathes in Argentina, Korea, and Taiwan,” World Development 13 (03 1985), pp. 364–66CrossRefGoogle Scholar.

5. For the rise of state capitalism and the deepening of import-substitution industrialization in Latin America, see Evans, Peter, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton, N. J.: Princeton University Press, 1979)Google Scholar.

6. On the limitations of Third World state enterprises, see Vernon, Raymond, Exploring the Global Economy (Lanham, Md.: United Press of America, 1985), pp. 151–62Google Scholar.

7. See Ho, Samuel P. S., “South Korea and Taiwan: Development Prospects and Problems in the 1980s,” Asian Survey 21 (12 1981), pp. 1175–96CrossRefGoogle Scholar.

8. For a well-documented account of the four NICs' economic adjustment experiences, see Cheng and Haggard, The Politics of Adjustment.

9. For a timely review of the state-centered, system-centered, and society-centered approaches, see Ikenberry, G. John, Lake, David, and Mastanduno, Michael, “Introduction: Approaches to Explaining American Foreign Economic Policy,” International Organization 42 (Winter 1988), pp. 1–14CrossRefGoogle Scholar.

10. Good examples of the neoclassical account of the East Asian growth include Balassa, Bela, The Newly Industrializing Countries in the World Economy (New York: Pergamon Press, 1981)Google Scholar; Bhagwati, J. N., Foreign Trade Regimes and Economic Development: The Anatomy and Consequences of Exchange Control Regimes (Cambridge, Mass.: Ballinger, 1978)Google Scholar; and Gustav Ranis, “Employment, Income Distribution and Growth in the East Asian Context: A Comparative Analysis,” paper presented at the Conference on Experiences and Lessons of Small Open Economies, Santiago, Chile, 1981.

11. For clear analytic accounts along the developmental state line, see Wade, Robert and White, Gordon, eds., “Developmental States in East Asia: Capitalist and Socialist,” Institute of Development Studies Bulletin 15(04 1984), pp. 1–70Google Scholar; and Evans, David and Alizadeh, Parvin, “Trade, Industrialization, and the Visible Hand,” Journal of Developmental Studies 20 (12 1984), pp. 22–46CrossRefGoogle Scholar. See also Amsden, Alice, “The State and Taiwan's Economic Development,” in Evans, Peter, Rueschemeyer, Dietrich, and Skocpol, Theda, eds., Bringing the State Back In (New York: Cambridge University Press, 1985)Google Scholar; and many articles contained in Deyo, Frederic C., ed., The Political Economy of East Asian Industrialism (Ithaca, N. Y.: Cornell University Press, 1987)Google Scholar. All attribute East Asia's successful late industrialization to a development-oriented dirigisté state.

12. Developmental state authors suggest that Hong Kong's export-oriented industrialization benefited from a strong indigenous capitalist class, mainly the Shanghainese capitalists. Some of the support functions performed by the state in other NICs, including export crediting, financing of infrastructure and investment, and promotion of small enterprises, were taken onby Hong Kong's giant commercial and financial establishments. An interesting parallel can be drawn between Hong Kong and Switzerland (the only laissez-faire economy among small European countries), according to Katzenstein, Peter in “Capitalism in One Country? Switzerland in the International Economy,” International Organization 34 (Autumn 1980), pp. 507–40CrossRefGoogle Scholar. In both countries, a liberal state is partially compensated by the encompassing multinational banks which, because of their sheer size, could not afford to take a short-term view about profits and thus had to take into account the impact of their investment strategy and lending practices on the whole economy.

13. See Ikenberry, Lake, and Mastanduno, “Introduction”; Ikenberry, G. John, “The Irony of State Strength: Comparative Responses to the Oil Shocks in the 1970s,” International Organization 40 (Winter 1986), pp. 105–37CrossRefGoogle Scholar; and Milner, Helen, “Resisting the Protectionist Temptation: Industry and the Making of Trade Policy in France and the United States During the 1970s,” International Organization 41 (Autumn 1987), pp. 639–65CrossRefGoogle Scholar.

14. Ikenberry, G. John, “Conclusion: An Institutional Approach to American Foreign Economic Policy,” International Organization 42 (Winter 1988), p. 223Google Scholar.

15. See Benjamin, Roger and Duvall, Raymond, “The Capitalist State in Context,” in Elkin, Stephen, ed., The Democratic State (Lawrence: University Press of Kansas, 1985), p. 55Google Scholar.

16. For an interesting argument on how ideas become encased in institutions through legal procedure, see Goldstein, Judith, “Ideas, Institutions, and American Trade Policy,” International Organization 42 (Winter 1988), pp. 179–84CrossRefGoogle Scholar.

17. See Wade, Robert, “East Asian Financial Systems as a Challenge to Economics: Lessons from Taiwan,” California Management Review 27 (Summer 1985), pp. 106–27CrossRefGoogle Scholar.

18. Zysman, John, Government, Markets and Growth (Ithaca, N. Y.: Cornell University Press, 1983)Google Scholar.

19. Williamson, Oliver E., The Economic Institution of Capitalism (New York: Free Press, 1985), pp. 47–49Google Scholar.

20. See Evans, Dependent Development.

21. See Stepan, Alfred, The State and Society: Peru in Comparative Perspective (Princeton, N. J.: Princeton University Press, 1978), p. 292Google Scholar.

22. I conceptualize “causal power” in terms of the enablement and constraints of social structure. Although this conceptualization differs from the logical positivist view, it is fully consistent with the view of scientific realism. See Wendt, Alexander, “The Agent-Structure Problem in International Relations Theory,” International Organization 41 (Summer 1987), pp. 335–70CrossRefGoogle Scholar.

23. In Hong Kong, the provision of many basic and essential services such as electricity, gas, public transportation, and communication is in the hands of private enterprises. For an overview of the role of government in the Hong Kong economy, see Chen, Edward K. Y., ”The Economic Setting,” in Lethbridge, David, ed., The Business Environment in Hong Kong (Oxford: Oxford University Press, 1984), pp. 36–43Google Scholar.

24. The two are the Hong Kong Shanghai Banking Company and the Standard Chartered Bank.

25. See Lin, T. B. and Ho, Y. P., Industrial Restructuring in Hong Kong (Bangkok: International Labor Organization-ARTEP, 1984)Google Scholar.

26. See Lethbridge, David and Hong, Ng Sek, “The Business Environment and Employment,” in Lethbridge, The Business Environment, pp. 81–83Google Scholar.

27. For a revealing report, see “Bank of Korea: In Search of Independence,” Business Korea, May 1988, pp. 25–27.

28. See Johnson, Chalmers, MITI and the Japanese Miracle (Slanford, Calif.: Stanford University Press, 1982)Google Scholar.

29. See Kim, Kwan S., “Industrial Policy and Industrialization in South Korea, 1961–1982,” working paper no. 39 of the Helen Kellogg Institute for International Studies (Notre Dame, Ind..: University of Notre Dame Press, 1985), pp. 29–42 and 51–55Google Scholar.

30. See Lim, Hyun-chin, Dependent Development in Korea, 1963–1979 (Seoul: Seoul National University Press, 1985), pp. 74–77Google Scholar.

31. See Stephan Haggard and Chung-in Moon, “Industrial Change and State Power: The Politics of Stabilization in Korea,” paper presented at the annual meeting of the American Political Science Association, August 1986, Washington, D. C.

32. By 1983, South Korea had became the fourth largest Third World borrower, owing well over $40 billion in public debt to international banks. The ratio of Korea's debts to its gross domestic product (GDP) was about 53.6 percent, and this debt burden was almost comparable to that of large Latin American borrowers such as Mexico and Brazil. See Bijan B. Aghevli and Jorge Marquez-Ruarte, “A Case of Successful Adjustment: Korea's Experience During 1980–84,” International Monetary Fund (IMF) occasional paper no. 39, 1985.

33. The contrast in adjustment experiences between South Korea and Taiwan is analyzed more fully in Chu, Yun-han, Authoritarian Regimes Under Stress: The Political Economy of Adjustment in the East Asian Newly Industrializing Countries, Ph. D. diss., University of Minnesota, 1987, chap. 4Google Scholar.

34. See Ho, “South Korea and Taiwan.”

35. See Yun-han Chu, “A Developmental State Under Stress: The Political Economy of Industrial Adjustment in Taiwan, 1973–1987,” Transformation (forthcoming).

36. See The Economist, 13 November 1982.

37. See Lim, David, Industrial Restructuring in Singapore (Bangkok: International Labor Organization-ARTEP, 1984), pp. 15–16 and 60–67Google Scholar.

38. Low, Linda, “Public Enterprise in Singapore,” in You, Poh-seng and Lim, Chong-yah, eds., Singapore: Twenty-Five Years of Development (Singapore: Nan Yang Xing Zhou Lianhe Zaobao, 1984), pp. 253–87Google Scholar.

39. See Krause, Lawrence, “Hong Kong and Singapore: Twins or Kissing Cousins?” Economic Development and Cultural Change 36 (Supplement, 04 1988), pp. S60–64CrossRefGoogle Scholar. In Multinationals and the Growth of the Singapore Economy (New York: St. Martin's Press, 1986), p. 110, Mirza Hafiz reports that state enterprises generated an estimated return of $5–6 billion in 1983, a massive amount equivalent to one-third of the total GDPGoogle Scholar.

40. The functions of the central bank are divided between the board (the note issuer) and the MAS. However, the power of setting monetary policy rests squarely on the MAS.

41. See Davies, Kathryn, “Singapore Adjusts to World Recession,” The Banker, 07 1983, pp. 101–105Google Scholar.

42. See Hafiz, , Multinationals and the Growth of the Singapore Economy, pp. 26–57Google Scholar.

43. See Lim, Linda Y. C., “Singapore's Success: The Myth of the Free Market Economy,” Asian Survey 23 (06 1983), pp. 752–65CrossRefGoogle Scholar.

44. Katzenstein, Peter J., Corporatism and Change: Austria, Switzerland, and the Politics of Industry (Ithaca, N. Y.: Cornell University Press, 1984), p. 33Google Scholar.