The Role of the State in Economic Development: Japan, South Korea, and Taiwan

Abstract

This paper examines the state's role in economic development in Japan, South Korea, and Taiwan. Late industrialization, weak civil society, oriental culture, and attachment to the West are analyzed to explain why the state sponsors economic development in accordance with a capitalist model. Industrial policies, promotion measures, economic growth, social stability, and democratic reform are surveyed to see how the state intervenes in the economy with what consequences. Liberalization toward market rationality is discussed in order to estimate how the state can continue its solidarity with business in a changing environment. What is learned from the East Asian experience? In developed countries, the state should be concerned with economy to avoid general dysfunctions and crises. In developing nations, a strong market-compatible authority is needed to unify national interests, motivate people, and make rational use of limited resources in order to pull the country out of underdevelopment. It is warned against radicalizing economic reform in socialist countries into a total dismantling of the command system. Reform should be conducted in a phased way so as to avoid any drastic impact which might prevent a country from concentrating necessary energy towards economic development.