Week 7 - Developmental States in Comparative Perspective Flashcards
What is the mainstream explanation of the early neoclassical assessment of Taiwan and South Korea?
ISI abandoned for realistic exchange rate, free trade, free market (underplays key state actions in the Northeast Asan “developmental states”
growth “despite industrial policies”
supported sectors (chemicals, non-metallic minerals) grew less well than non supported-sectors (textiles)
manufactured exports based on comparative advantage
What did the World-Bank attribution of the “developmental states” stay within?
stayed within the bounds of neoclassical economics’ prescriptions
What did the World-Bank attribute the “developmental states” success to?
private investment + human capital = drivers of growth
private investment sustained by savings
rapid agricultural growth + productivity improvement
population growth declined
strong macroeconomic management and stability
price distortions were minimised
investment in primary and secondary education
What did the “developmental states” do to develop? (6)
industrial policy
agricultural policy
management of finance
macroeconomic management
incomes policy
social policy
One of things the “developmental states” did was industrial policy, what did this involve?
state maintained ISI while supporting development of export-oriented industries (protects from competition in domestic market (tariffs, quotas))
prioritised use of scarce foreign exchange
promoted technology acquisition
One of things the “developmental states” did was industrial policy, what did this involve for South Korea and Taiwan?
South Korea (cement, steel, shipbuilding, machinery)
Taiwan state corporations (petrochemicals, metals and power generation)
both willing to take risks
One of things the “developmental states” did was agriculture policy, what did this involve?
protected and subsidised (built on previous land reforms to promote small farming, provided credit and ensured rural infrastructure)
ensured growth (extracted surplus while gradual improvement in rural incomes (allowed expansion of household investment in education, market for ISI goals, steady flow of labour to new industries))
One of things the “developmental states” did was state control of finance, what did this involve?
leverages over private sector
firms with high debt to equity ratios (Taiwan 1:1, Korea 3:1, Western firms <1:1)
small businesses took informal credit
One of things the “developmental states” did was state control of finance, what did this involve for Korea and Taiwan?
South Korea nationalised banks and reliance on chaebols, state controlled borrowing abroad
Taiwan state-owned commercial banks and SOEs, domestic savings (like Japan) (postal savings systems), lack of social security gave incentive to save
One of things the “developmental states” did was macroeconomic stability, what did this involve?
to foster long-term investment
stability of exchange rates (often undervalued), interest rates and prices
maintained fiscal integrity (public sector deficits in Korea and surpluses in Taiwan)
public spending concentrates on investment over social services
corporate taxation was low but enforced plus indirect taxation (repressed consumption)
state managed inflation
One of things the “developmental states” did was income policy, what did this involve?
raised living standards while social organisations were suppressed
equitable income distribution during formative years
repressive labour regimes + steady growth in workers’ standard of living
low wages made manufacturing competitive
delayed gender equity
One of things the “developmental states” did was social policy, what did this involve?
household income for education (route to advancement)
incremental health insurance (1977 workers in large enterprises, 1989 self-employed in rural and urban areas, 2000 National Health Insurance)
incremental improvement in social security (promoted household savings)
What is a summary of what the “developmental states” did to succeed?
prioritise growth
private property/market allocation
elite economic bureaucracy
institutions/organisations
bureaucrats rule while politicians reign
What did the state do in the “developmental states” to succeed?
ensured high levels od productive investment and fast technological transfer
ensured key industries
ensured competition
What is a corporatist authoritarian regime?
market guidance through supply of investable resources, socialising risks of long-term investment and steering the allocation of investments
What were possible causes of the “developmental states” success? (4)
colonial legacy
US foreign aid
historical point
cultural explanations
One of the possible causes of the “developmental states” success is colonial legacy, what did this involve?
Japanese colonialism transformed South Korea and Taiwan laying the foundations for a “cohesive capitalist state”
(counterpart is that both countries had rent-seeking regime and land reform was not part of the developmental project (in Korea preceded it, in Taiwan due to threat in China and preceded accelerated growth)
One of the possible causes of the “developmental states” success is US foreign aid, what did this involve?
geopolitics led the US to tolerate a departure from orthodoxy
(counterpart is that aid was important, but does not explain developmental coalition (e.g. Philippines has massive US but no developmental state emerged)
One of the possible causes of the “developmental states” success is historical point, what did this involve?
when ISI was accepteable
(counterpart is that confucian mentality earlier seen as barrier and ethnic composition did not change)
One of the possible causes of the “developmental states” success is cultural expectations, what did this involve?
confucianism and ethnic homogeneity
(counterpart is that confucian mentality earlier seen as barrier and ethnic composition did not change)
What was “systematic vulnerability” in the developmental states?
political elites were staring down the “barrels of three guns”
What are the “barrels of three guns” that were the “systematic vulnerability” in the developmental states?
(internal and external threat to survival)
deterioration of living standards threatened mass unrest of heavily mobilised rural population
need for foreign exchange and war material
hard budget constraint
What is the politics as alternative explanation for the developmental states success?
internal and external threats to the survival of elites
civil society and labour repressed
political competition suppressed
Was land reform under Rhee an act of a developmental state?
No, but helped establish the conditions for a developmental state to emerge
What were the internal and external threats South Korea faced and what did this lead to? (land reform)
external threat from North Korea
internal threat from peasant mobilisation within South Korea led landowners to cede power to the state
post land reform meant elites had less room for exit, incentive to invest in industry, elites vulnerable to Park regime
Why did Latin America not have sustained industrial growth?
oligarchy no compulsion to take risks
home-grown neoliberals adopted adjustment
when ISI faltered states borrowed instead of shifting course
locked into commodity trade
weak or no agrarian reforms (low mobilisation of surplus for industrialisation, industrialisation occurred before agrarian change, social chains on the state by urban populations)
failure to reform agrarian tenure (solidified poverty (restricted domestic market), created dual agricultural sector of poor peasants and well-connected agribusiness)
Why did SSA not have sustained industrial growth?
barriers to states acting developmentally
rent seeking conditions formed under colonial authorities and reinforced by BWIs after independence
local business classes had little access to the state
dominant coalitions in many states had little interest in agriculture
structural adjustment weakened state capacity and provoked “de-industrialisation”
Comparing Malaysia, Thailand and Indonesia, which did better?
Malaysia and Thailand did relatively better than Indonesia
What role did states play in NICs compared to SEA?
state played some role in finance and directing credit
What did macroeconomic management do in NICs compared to SEA?
macroeconomic management achieved string fiscal position for the state
What type of finance was relied on in NICs compared to SEA?
all encouraged domestic savings to finance investment, but relied much more heavily on FDI
Why did Malaysia have less effective industrial policies than other NICs?
their industrial policies were coloured by buying loyalty of ethnicities (did not match NEA manufacturing export growth, less attention to strategic industries, never subjected to same performance standards)
What type of agricultural policy was relied on in NICs compared to SEA?
investment in rural infrastructure but unequal in food crop sector and moved away from food security
What type of income distribution was in NICs compared to SEA?
worse on income distribution
Why did the NICs not perform as well as SEA?
none were subjected to the same “systemic vulnerabilities” as South Korea and Taiwan
What are the “developmental states” like today?
“developmental states” have not reinvented themselves and have not become neoliberal states
What are three summary points of why “developmental states” performed well?
political organisations in control of the state played a decisive role in determining developmental progress
diversity of avenues and institutional arrangements led to transformational change
land reforms created social conditions
What type of state was Northeast Asia (e.g. South Korea)?
interventionist
What did it mean that the Northeast Asia (e.g. South Korea) state were interventionist?
compelled the wealthy to take risks to invest in value added processes of production, trade, services
ensured a continuing supply of healthy skilled labour
restricted social claims on the budget and on wages to bolster accumulation processes
ensured incomes followed rises in productivity (crucial to welfare and robust markets)
What did the World Bank and neoliberal economists say the main lesson to be learned from the East Asian NICs is?
main lesson to be learned from the East Asian NICs is that free markets, free trade and an export-orientated development strategy are the key to economic success
(countries that pursued protectionism and import ISI policies came in for heavy criticisms by World Bank and advocates of neoliberal economic policies)
What is the main reason for the success of NICs?
largely a result of the crucial role played by the state, which also at times involved selective protectionist policies
What is agricultural surplus?
total value of agricultural production minus what the agricultural sector retains for its own consumption and reproduction
What are the main agricultural issues?
how best to increase agricultural output by ensuring sufficient incentives for farmers
most suitable mechanisms with which to extract an agricultural surplus (ensuring that not too much is extracted)
best way to use agricultural surplus for industrial development (to ensure the resources are not wasted in financing an inefficient industrialisation process)
What was agrarian reform in East Asia like?
was political in both countries, not economic
In Latin America, how did the share in value of export change from the 1950s-1990s?
share in the value of exports declined from well over half in the 1950s to one-fifth in the 1990s, while share of agricultural imports within total imports increased
What did South Korea need to do to stabilise the new republic politically?
overriding need to neutralise communist influence and reduce class conflicts to stabilise the new republic politically
What was the East Asian model?
strong, centralised states, had the autonomy and control to direct economic resources and enforce policies aimed at industrialisation (actively guided the development process with targeted policies)
What was the Latin American model?
states often limited by powerful elites who resisted major lan and economic reforms (weakened state capacity made it difficult to enforce policies and limited large-scale economic changes)
What was the East Asian agrarian reform?
South Korea and Taiwan implemented comprehensive land reforms before industrialisation, redistributing land from landlords to peasants, which reduced class disparities in rural area and were politically stabilised by eliminating influence of the landlord class (rural sector could support industrialisation through increased productivity and a steady labour supply for urban industries)
What was the Latin American agrarian reform?
increasing failings of agriculture prompted governments into action and from 1950s onwards put in place to encourage modernisation (e.g. subsidies)
most carried out agrarian reform after industrialisation had begun, often reluctantly and under pressure from social movements
What was the industrialisation timing between East Asia and Latin America?
Latin America started much earlier, but fell behind
How was the East Asian agricultural surplus?
South Korea and Taiwan policy focused on creating a surplus that could support industrialisation that was extracted through procurement prices below market levels, taxing agricultural exports, setting unfavourable terms of trade for agriculture (revenue generated supported industrialisation, enabling manufacturing sector growth without relying heavily on foreign debt)
How was the Latin American agricultural surplus?
focus on traditional exports did not produce a sufficient surplus to support industrial development and combined with lack of innovation in agriculture, limited productivity and sector could not contribute effectively to industrial sector (failure of integrating agriculture with industrial policy contributed to persistence of inequality and limited rural development)
How was the East Asian export-oriented industrialisation?
South Korea and Taiwan adopted an export-oriented approach early in their industrialisation, focusing on producing goods for international markets (allowed earning of foreign exchange, attracted investment, and developed a competitive industrial base, benefiting from economies of scale)
What type of industrialisation did East Asia undertake?
export oriented industrialisation
What type of industrialisation did Latin America undertake?
import substitution industrialisation
How was the Latin American import substitution industrialisation?
protected local industries by restricting imports to encourage domestic production which initially helped build local industries, but became inefficient and uncompetitive (when tried to shift to export-oriented policies later on, struggled to break into international markets and compete, given the entrenched protectionism)
How was the East Asian state capacity?
South Korea and Taiwan had autocratic rule after independence (had substantial social, political, cultural control over the population and were able to mobilise their energy for hard work and productive purposes)
How was the Latin American state capacity?
far less control over industrial bourgeoisie, financial sector and economy
had considerably weaker grip over the agricultural sector
had to handle a more complex and conflictual situation (more deficient statecraft is partly due to its more polarised and entrenched class structure)
natural resource abundance created wealth either appropriated by foreigners or strengthens power of dominant class that controls the natural resources (limits statecraft as dominant classes use it for own interests rather than wider developmental interests)
How was the East Asian landlords?
South Korea and Taiwan landlords not in position to obstruct the massive land reform process (was seen as way to protect from communism)
became capitalist entrepreneurs (used their compensation payments to make investments industry, finance and commerce), which were successfully integrated into the new development model, thereby blunting their resistance to agrarian reform
How was the Latin American landlords?
able to resist land reforms until the 1960s (even when they happened landlords succeeded in limiting their impact and sometimes even managed to reverse the process)
remained hostile to the government and tried to undermine it instead of joining it in a national development effort (compensation funds were limited, lost much of their value through inflation and landlords were profoundly distrustful of the government which had expropriated their estates)
conflict between landlords and peasants were more acute in LA
sharper ethnic divide in LA (indigenous are peasants, Spanish and Portuguese are landlords)
How did surplus labour in East Asia work?
surplus labour in South Korea and Taiwan was released to the industrial sector, keeping wages low, while at the same time ensuring agricultural production continued to grow to ensure an adequate supply of food to the industrial works
What were the East Asian unequal terms of trade?
the government forced peasants to sell food below market prices so industrial workers could buy food cheaper, allowing wages to not rise so industrialists have higher profit to reinvest (peasants still buy products from industrialists at market prices)
What East Asian equitable outcomes are seen?
land reforms and inclusive industrialist policies helped reduce disparities between urban and rural populations
South Korea and Taiwan are among one of world’s lowest income inequality (positive effects on social and political stability and provided solid foundation for industrialisation)
once successful industry established, the need for extracting agricultural surplus diminished and the flow of resources reverted
What Latin American unequitable outcomes are seen?
agrarian structure remained highly unequal, as large landowners controlled productive land, rural poverty persisted, limited land reform meant that substinence farmers had minimal impact on economic productivity and industrial jobs were insufficient for growing urban population (exacberated urban-rural disparities, leading to political instability and social unrest)
inequality, poverty, social exclusion still prevalent throughout most of Latin America
Why did Latin America fall behind South Korea and Taiwan?
neglect of agricultural exports together with failure to shift at an earlier stage to an export-orientated industry strategy
What are the main differences between South Korea and Taiwan and Latin America?
South Korea and Taiwan had a superior state capacity and policy performance
Latin America failure to create an agrarian structure more conducive to growth with equity
South Korea and Taiwan greater ability to design an appropriate industrial policy (brought more positive interaction between agriculture and industry)
What is a summary of the successes East Asia managed?
in general, agriculture made an important contribution in developed countries first stages of industrialisation
not just a matter of transferring resources from agriculture to industry (policies should generate a dynamic interaction between the two sectors)
What are the East Asian critiques?
land reform was how an authoritarian regime defended its own existence (new taxes to the state, farmers paid higher input prices and received lower prices for their goods than before land reform)
peasant farers found it difficult to organise politically (in weak position to resist the state)
What are developmental states?
organisational complexes in which expert and coherent bureaucratic agencies collaborate with organised private sectors to spur national economic transformation (these institutional features were key to an unparalleled capacity for the promotion of economic development)
rare
Are developmental states common?
No, they are rare
What is the political origins of developmental states?
systematic vulnerability (interactive condition)
When will political elites build developmental states?
Political elites will only build such institutional arrangements when 1) broad coalition commitments, 2) severe security threats, 3) scarce resource endowments
interactive condition is neccessary and sufficient condition for developmental states
(makes the reconciliation of coalition, geopolitical, and fiscal constraints matter of ruling elites’ political survival)
What are the broad coalition commitments (one of the systemic vulnerabilities)?
the credible threat that any deterioration in the living standard of popular sectors could trigger unmanageable mass unrest
What are the severe security threats (one of the systemic vulnerabilities)?
the heightened need for foreign exchange and war material induced by national insecurity
What are the scarce resource endowments (one of the systemic vulnerabilities)?
the hard budget constraints imposed by a scarcity pf easy revenue source
What does addressing the simultaneous presence of all three conditions of the systemic vulnerabilities require?
strong institutions
What did the successful implementation of universal reformed devoted to improving human capital in developmental states require?
required the establishment of institutions capable of enhancing consultation with private actors, coordinating diverse interests, monitoring performance of firms and research institutions, maintaining sufficient autonomy from private interests to impose reciprocit
What are “intermediate states”?
countries that have developed some level of institutional capacity and economic growth but lack the comprehensive, high-capacity institutions of “developmental states”
What are narrow coalitions?
favour limited elite interests
What are broad coalition commitments?
force governments to consider the welfare of larger social groups
side payments had to be economically sustainable and promote productivity rather than mere consumption
What are side payments?
benefits to coalition partners
What are security threats?
presence of significant external threats (e.g. from neighbouring countries or ideological rivals) pressured these states to strengthen institutions for survival (leaders had to focus on self-reliance and national reliance, especially in South Korea and Taiwan)
What are resource constraints?
lack of easy access to revenue (e.g. natural resources) forced governments to adopt efficient economic policies and focus on high-value exports to generate foreign exchange
(resource-rich ASEAN countries (e.g. Malaysia, Indonesia) often relied on resource exports and did not face similar fiscal pressure)
What were the Northeastern NICs institutions like?
South Korea, Taiwan and Singapore developed strong, efficient bureaucracies and private-public sector linkages (high levels of institutional capacity allowed them to coordinate policy effectively and respond to economic challenges by fostering innovation and upgrading industries)
What were the Southeast Asian ASEAN-4 like?
Indonesia, Malaysia, Philippines and Thailand achieved economic growth but without same degree of industrial upgrading as NICs
institutional efforts were more clientelistic and fragmented, with limited capacity for long-term economic transformation
absence of combined systemic vulnerabilities allowed these states to rely on less institutionally demanding policies
What is a summary of South Korea and Taiwan and systemic vulnerabilities?
systemic vulnerabilities drove land reforms and primary education expansion (improving rural productivity and mitigating social unrest)
transitioned from rural development and import substitution to export oriented industrialisation and eventually high-value added industries
authoritarian but accountable regimes maintained control by delivering broad benefits (pushing for long-term productivity and economic self-sufficiency)
What is a summary of Singapore and systemic vulnerabilities?
faced unique combination of internal and external pressures, including ethnic tensions and threats from Malaysia
government established robust state institutions to promote economic growth while delivering benefits (e.g. subsidised housing and technical education) and emphasis on upgrading allowed avoiding low-wage, low-skill development trap
What is a summary of Thailand, Malaysia, Indonesia and Philippines and systemic vulnerabilities?
faced fewer constraints, allowing them to maintain broad coalitions without developing strong bureaucracies or industrial policies
economic policies often relied on natural resources or external support, limiting institutional innovation
Thailand experienced episodic institutional growth, especially during times of economic crisis, but reforms were often abandoned when conditions improved
What are the unique conditions regarding developmental states?
developmental states emerge under rare conditions when ruling elites are rightly constrained by systemic vulnerabilities
In developmental states, who do the governments work closely with?
the private sector
What was foreign support in South Korea and Taiwan related to?
assistance from US is related to interests to curb communist threats during Cold War
(East Asian NICs received significant support from the US, playing a part in their developmental state during mid-20th century, having access to US market for their firms, deficit coverages and military support)
What were the anti-developmental forces hampering development in Asian and Latin American countries?
sharp growth slowdowns (1980s debt crisis resulting in the middle-income trap)
neoliberal paradigm (pressures countries to increase growth through integrating their industry to the global value chain and opening doors to foreign investments)
What were the effects of external factors in developmental states?
US support to East Asian countries gives them more room to grow and manoeuvre their trade compared to Latin America
Southeast Asian countries that never faced systemic vulnerabilities had ruling elites that were not pressures to build developmental states
What characterizes crony capitalism as described by Putzel?
A network of businessmen with connections to the president, gaining wealth through non-productive personal fortunes domestically and internationally
What were the central features of superior performance in developmental states?
High levels of productive investment, transfer of techniques into production, investment in key industries, and exposure to international competition
What organisational feature allowed developmental states to act effectively?
A corporatist character combined with authoritarian political arrangements
What measures were central to the performance of developmental states?
Land reform, state control of finance, macroeconomic stability, industrial policy, attention to agriculture, and incomes policy
How did land reform contribute to developmental states’ performance?
It reallocated property rights, improved rural incomes, supported political stability, and shifted focus to industrial investment
What was the impact of state control over finance in developmental states?
It gave the state leverage to direct private investment into priority industries and subordinated financial capital to industrial capital
How did macroeconomic stability support long-term investment?
By maintaining stable exchange rates, low borrowing rates, controlled inflation, and directing public expenditure to investment
What strategies were included in the industrial policies of developmental states?
Promoting strategic industries, limiting foreign competition, prioritizing scarce foreign exchange, and supporting technology acquisition
How did developmental states support agriculture?
Through land reform, infrastructure investments, and agricultural protection, enabling steady labor flows to industry
What was the purpose of incomes policies in developmental states?
To align wage increases with productivity, creating equitable income distribution while suppressing social organisations
How did Southeast Asian developmental policies differ from Northeast Asia’s?
Southeast Asia relied more on FDI, had weaker land reforms, and less coherent industrial policies compared to Northeast Asia
What economic conditions contributed to Southeast Asia’s vulnerability before the 1997 crisis?
Financial liberalisation, dependence on foreign capital, and currency alignment with the US dollar, limiting export competitiveness
What triggered the 1997 Asian Financial Crisis?
Loss of confidence in currency stability, leading to capital flight, currency devaluations, and high debt defaults
Which country was most affected by the 1997 crisis?
Indonesia, due to intersecting political instability, corruption, and nepotism
How did Malaysia stabilise its economy during the crisis?
By imposing capital controls, allowing control over interest rates and public spending
How did the IMF respond to the 1997 Asian crisis?
It imposed austerity measures and structural adjustments, which exacerbated economic instability
How did liberalisation impact Southeast Asia’s economic systems?
It accelerated cronyism by giving politically connected private groups access to international capital and increased vulnerability to external shocks
Why did Southeast Asia struggle to replicate Northeast Asia’s success?
It lacked strong state involvement, comprehensive land reforms, and coherent industrial policy, relying more on FDI
What role does the state play in the globalized and liberalised economy?
The state remains crucial, especially during crises, to stabilize economies and manage global and local economic challenges
What is the main argument of Haggard, Moon, and Kang regarding Korea’s growth under Japanese colonialism?
Korea’s growth under Japanese occupation was modest and uneven, with significant long-term growth attributed to political, policy, and institutional changes after the 1961 military coup
What do revisionists claim about Japanese colonialism’s impact on Korea’s development?
They argue that Japanese colonialism laid the groundwork for Korea’s growth by transforming the state, fostering business-government relations, and enabling social transformations for a high-growth economy
How do the authors critique the revisionist claims?
They contend that growth under Japanese rule was modest, uneven, and lacked enduring benefits, with most colonial-era achievements reversed post-independence
How did agriculture fare under Japanese rule in Korea?
Growth in rice production benefited Japan at the expense of Korean farmers, while productivity in other agricultural sectors stagnated or declined
What was the state of industrialization under Japanese colonialism?
Industrial growth was concentrated in Japanese-owned firms, with over 90% of industrial capital controlled by Japanese entities by 1940, limiting Korean participation
What were the effects on employment and wages during the colonial period?
Industrial employment remained minimal, real wages declined, and postwar economic collapse erased most colonial-era physical and institutional legacies
How did post-independence governance utilize the colonial bureaucratic structure?
It was repurposed for patronage and rent-seeking by nationalist and political elites
What reforms followed the 1961 military coup in Korea?
Structural reforms under Park Chung Hee emphasized export-oriented industrialization and a meritocratic civil service
Did Korean firms and entrepreneurs from the colonial period play a significant role post-independence?
A minority did, but most leading firms of the post-1960s export boom were established after liberation, benefiting from domestic policies and US aid
How did Japanese colonial social policies affect Korean society?
Landlord-tenant relations and labor practices exacerbated inequality and unrest, while educational policies restricted Korean identity and mobility
What social advances occurred post-independence?
Land reforms and expanded educational opportunities improved social mobility and human capital in the 1950s and 1960s
What role did Park Chung Hee’s administration play in Korea’s economic take-off?
It implemented export-oriented industrialization and leveraged local and international influences for growth
How did the Japanese colonial model differ from Korea’s post-independence development?
The colonial model prioritized extractive and imperial goals, while post-independence policies focused on addressing inequalities and fostering sustainable growth
What do the Haggard and Kang conclude about Korean economic success?
It was rooted in post-independence policy shifts, with political independence enabling reforms that addressed inequalities and inefficiencies
