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South Korean and Taiwanese development and the new institutional economics

  • David C. Kang (a1)
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Thanks to Vinod Aggarwal, Tom Bickford, Bob Bullock, Barbara Connolly, Stephan Haggard, Jeff Keele, Carol Medlin, Greg Noble, John Odell, Richard Snyder, and the anonymous referees of International Organization for their comments.

1. For two other reviews, see Wade, Robert, “East Asia's Economic Success: Conflicting Paradigms, Partial Insights, Shaky Evidence,” World Politics 44 (1992), pp. 270320; and Onis, Ziya, “The Logic of the Developmental State,” Comparative Politics 24 (10 1991), pp. 109–26.

2. For those who argue that state intervention was at best neutral and at worst deleterious for development, see James, William, Naya, Seiji, and Meier, Gerald M., Asian Development: Economic Success and Policy Lesson (Madison: University of Wisconsin Press, 1989); Balassa, Bela, ed., Development Strategies in Semi-industrial Countries (Baltimore, Md.: The Johns Hopkins University Press, 1982); Westphal, Larry, “The Republic of Korea's Experience with Export-led Industrial Development,” World Development 6 (06 1978), pp. 347–82; and Hughes, Helen, ed., Achieving Industrialization in Asia (Cambridge: Cambridge University Press, 1988). For those who argue that state intervention was not only intentional but positive, see Luedde-Neurath, Richard, Import Controls and Export-Oriented Development: A Reassessment of the South Korean Case (Boulder, Colo.: Westview, 1986); and Mardon, Russell, “The State and the Effective Control of Foreign Capital: The Case of South Korea,” World Politics 43 (1990), pp. 111–38. Much of the study of Japan, in particular, revolves around this debate. See, for example, Johnson, Chalmers, MITI and the Japanese Miracle (Stanford, Calif.: Stanford University Press, 1982); and Noble, Gregory, “Japanese Industrial Policy: Old Debates and New Directions,” in Haggard, Stephan and Moon, Chung-in, eds., Pacific Dynamics: The Politics of Industrial Change (Boulder, Colo.: Westview, 1988). For examples of those who examine the politics behind the state, see Cumings, Bruce, “The Origins and Development of the Northeast Asian Political Economy: Industrial Sectors, Product Cycles, and Political Consequences,” International Organization 38 (Winter, 1984), pp. l40; Johnson, Chalmers, “Political Institutions an Economic Performance: The Government-Business Relationship in Japan, South Korea, and Taiwan,” in Deyo, Frederic, ed., The Political Economy of the New Asian Industrialism (Ithaca, N.Y.: Cornell University Press, 1987), pp. 136–64; Hagen Koo, “The Interplay of State, Social Class, and World System in East Asian Development: The Cases of South Korea and Taiwan,” in ibid.; Cheng, Tun-jen, “Political Regimes and Development Strategies: South Korea and Taiwan,” in Gereffi, Gary and Wyman, Donald, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia (Princeton, N.J.: Princeton University Press, 1990), pp. 139–78; and Haggard, Stephan, Pathways from the Periphery (Ithaca, N.Y.: Cornell University Press, 1990).

3. For an excellent overview of eight Asian economies that generally stresses neoclassical explanations but is sensitive to government intervention, see World Bank, The East Asian Miracle: Economic Growth and Public Policy (New York: Oxford University Press, 1993).

4. See, for example, Hong, Wontack, Factor Supply and Factor Intensity of Trade in Korea (Seoul: Korea Development Institute, 1976); Lee, Gye-Sik, “Bokjigukgaui Jongewa Bokji Jaewon Jodal Jongcheck” (The development and financial policies of the public welfare state), working paper no. 91–25, Korea Development Institute, Seoul, 08 1991; Jong, Byong-Gol and Yang, Yung-Sik, Hanguk Chaebol Bumunui Gyongje Bunsok (An analysis of the economics of the Korean chaebol), (Seoul: Korea Development Institute, 1992); and Kim, Yoon Hyung, Hankuk Cheolgang gongeop ui seongjang (Growth of iron and steel industries in Korea) (Seoul: Korea Development Institute, 1989).

5. Amsden, Alice, Asia's Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, 1989), p. 8, emphasis original.

6. Ibid., p. 12.

7. Ibid., p. 243.

8. The quotation is from ibid., p. 14.

9. Wade, Robert, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, N.J.: Princeton University Press), p. 73.

10. Ibid., pp. 301–2.

11. For example, work on strategic trade moves past standard neoclassical prescriptions for fully free markets and incorporates notions of increasing returns to scale and first-mover advantages. See Grossman, Gene M. and Richardson, J. David, “Strategic Trade Policy: A Survey of Issues and Early Analysis,” Special Papers in International Economics, no. 15, International Finance Section, Department of Economics, Princeton University, Princeton, N.J., 1985; and Krugman, Paul, Strategic Trade Policy and the New International Economics (Cambridge, Mass.: MIT Press, 1986). On development in particular, see Lau, Lawrence and Kim, Jong-il, “The Role of Human Capital in the Economic Growth of the East Asian NICs,” (Stanford University, Stanford, Calif., 1993, mimeographed); Young, Alwyn, “A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore,” in National Bureau of Economic Research, NBER Macroeconomics Annual 1992 (Cambridge, Mass.: MIT Press, 1992); Leff, Nathaniel H. and Sato, Kazuo, “Psychocultural Conditions and Economic Development: Saving and Investment Behavior in East Asia and Latin America,” working paper no. FB-88–32, Graduate School of Business, Columbia University, New York, 1988; and Bradford, Colin I. Jr, and Branson, William H., eds., Trade and Structural Change in Pacific Asia (Chicago: University of Chicago Press, 1987).

12. Amsden, , Asia's Next Giant, p. 15.

13. Ironically, Amsden cites Kukje as an example of economic considerations driving government support or sanctions. See ibid.

14. For accounts of the Kukje failure, see Butler, Steve, “Seoul Tightens Up After Conglomerate's Failure,” Christian Science Monitor, 28 03 1985, p. 23; Wall Street Journal, “Kukje to be Split Up,” 25 February 1985, p. 32, and “Hanil Synthetic Fiber Co. Acquires Building and Interest in Hotel from Kukje,” 4 March 1985, p. 30.

15. Gereffi, Gary, “Paths of Industrialization: An Overview,” in Gereffi, and Wyman, , Manufacturing Miracles, p. 12. Peter Chow finds that export growth significantly influenced industrial development in Brazil, Israel, Mexico, and the East Asian NICs. Only in Argentina was no causality apparent. See Chow, Peter C. Y., “Causality Between Export Growth and Industrial Development: Empirical Evidence from the NICs,” Journal of Development Economics 26 (06 1987), pp. 5563.

16. For an interesting study of East Asian NICs in historical as well as a comparative context, see Young, Alwyn, “Lessons from the East Asian NICs: A Contrarian View,” working paper no. 4482, National Bureau of Economic Research, Cambridge, Mass., 1993. The Gereffi and Wyman volume, Manufacturing Miracles, focuses on development strategies and choices and specifically compares Latin America and East Asia. For other excellent works utilizing an explicitly comparative approach, see Haggard, Pathways from the Periphery; Anderson, Kym, Hayami, Yujiro, and George, Aurelia, The Political Economy of Agricultural Protection: East Asia in International Perspective (Sydney: Allen and Unwin in association with the Australia-Japan Research Centre, Australian National University, 1986); Hamilton, Gary, ed., Business Networks and Economic Development in East and Southeast Asia (Hong Kong: Centre of Asian Studies, University of Hong Kong, 1991); and Haggard, Stephan, Lee, Chung H., and Maxfield, Sylvia, eds., The Politics of Finance in Developing Countries (Ithaca, N.Y.: Cornell University Press, 1993). The comparison of Southeast Asian political economy to the Northeast Asian NICs may be mutually beneficial. For work in this vein, see Doner, Richard F., “Approaches to the Politics of Economic Growth in Southeast Asia,” Journal of Asian Studies 50 (11 1991), pp. 818–49; Hawes, Gary and Liu, Hong, “Explaining the Dynamics of the Southeast Asian Political Economy: State, Society, and the Search for Economic Growth,” World Politics 45 (07 1993), pp. 629–60; and Irwan, Alex, “Business Patronage, Class Struggle, and the Manufacturing Sector in South Korea, Indonesia, and Thailand,” Journal of Contemporary Asia 19 (12 1989), pp. 398434.

17. Jeffry Frieden, personal communication, 11 October 1993. Even the World Bank cautiously is beginning to admit that some government intervention can be positive. In a recent study, funded in part with Japanese funds, the World Bank concludes that “In some economies, mainly those in Northeast Asia, some selective interventions contributed to growth.” See World Bank, The East Asian Miracle, p. vi.

18. Kaufman, Robert, “How Societies Change Developmental Models or Keep Them: Reflections on the Latin American Experience in the 1930s and the Postwar World,” in Gereffi, and Wyman, , Manufacturing Miracles, pp. 110–38. The quotation is drawn from p. 127.

19. Gereffi, , “Big Business and the State,” in Gereffi, and Wyman, , Manufacturing Miracles, pp. 90109. The quotation is drawn from p. 97.

20. For example, Stephan Haggard writes that “Democracies and polities organized on the basis of clientelistic networks are less insulated than corporatist regimes and those authoritarian regimes which limit autonomous political organization.… On the whole, the Latin American states have had greater difficulty maintaining internal coherence [than the East Asian NICs].” See Haggard, , Pathways from the Periphery, p. 45.

21. A recent spate of promising work has begun to examine the roles of labor, class, and agriculture in development in Korea and Taiwan. See Deyo, Frederic, Beneath the Miracle: Labor Subordination in the New Asian Industrialism (Berkeley: University of California Press, 1989). On land reform and the Taiwanese agriculture experience, see Anderson, Douglas L. and Barrett, Richard E., “Demographic Seasonality and Development: The Effects of Agricultural Colonialism in Taiwan, 1906–1942,” Demography 27 (08 1990), pp. 397411; and Cheng, , “Political Regimes and Development Strategies,” especially pp. 145–47. On agriculture, see Burmeister, Larry L., “State, Industrialization, and Agricultural Policy in Korea,” Development and Change 21 (04, 1990), pp. 197223. On foreign capital see Kuo, Chich-heng, International Capital Movements and the Developing World: The Case of Taiwan (New York: Praeger, 1991); and Lee, Sheng-yi, Money and Finance in the Economic Development of Taiwan (London: Macmillan, 1990).

22. For transaction-cost economics, see Williamson, Oliver E., The Economic Institutions of Capitalism (New York: The Free Press, 1985); and Klein, Benjamin, Crawford, Robert, and Alchian, Armen A., “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process,” Journal of Law and Economics 21 (10 1979), pp. 297326. For work on the public choice aspects of organization, see Mancur Olson's seminal work, The Logic of Collective Action (Cambridge, Mass.: Harvard University Press, 1965); and Buchanan, James and Tullock, Gordon, The Calculus of Consent (Ann Arbor: The University of Michigan Press, 1962). For excellent introductions to the NIE, see Moe, Terry, “The New Economics of Organization,” American Journal of Political Science 28 (11 1984), pp. 739–77; Alt, James E. and Shepsle, Kenneth A., eds., Perspectives on Positive Political Economy (Cambridge: Cambridge University Press, 1990); and Furubotn, Erik and Richter, Rudolf, “The New Institutional Economics: An Assessment,” in Furubotn, Erik and Richter, Rudolph, eds., The New Institutional Economics (College Station, Tex.: Texas A and M Press, 1991). For critiques, see Granovetter, Mark, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology 91 (11 1985), pp. 481501; Posner, Richard, “The New Institutional Economics Meets Law and Economics,” Journal of Institutional and Theoretical Economics 149 (03 1993), pp. 73121 (with replies from Ronald Coase and Oliver Williamson); and Dore, Ronald, “Goodwill and the Spirit of Market Capitalism,” British Journal of Sociology 34 (12 1983), pp. 459–82.

23. The “old” institutionalists generally were united in their disdain for deductive theory and divided over how to present an alternative approach. On old institutionalism, see DiMaggio, Paul and Powell, Walter, “Introduction,” in Powell, Walter and DiMaggio, Paul, eds., The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991), pp. 339; and Commons, John, Institutional Economics (Madison: University of Wisconsin Press, 1934). For historical institutionalism, see Steinmo, Sven, Taxation and Democracy: Swedish, British, and American Approaches to Financing the Modem State (New Haven, Conn.: Yale University Press, 1993); and March, James and Olsen, Johan P., Rediscovering Institutions: The Organizational Basis of Politics (New York: Free Press, 1989).

24. Bardhan, Pranab, “The New Institutional Economics and Development Theory: A Brief Critical Assessment,” World Development 17 (09 1989), pp. 1389–96.

25. Williamson, Oliver, “Comparative Economic Organization: The Analysis of Discrete Structural Alternatives,” Administrative Science Quarterly 36 (06 1991), pp. 269–96.

26. North, Douglass, Structure and Change in Economic History (New York: Norton, 1981).

27. Weingast, Barry, “Constitutions as Governance Structures: The Political Foundations of Secure Markets,” Journal of Institutional and Theoretical Economics 149 (03 1993), pp. 286311. The quotation is from p. 287, emphasis original.

28. The classic study is North, Structure and Change in Economic History. On the U.S. Congress, see Weingast, Barry and Marshall, William, “The Industrial Organization of Congress, or, Why Legislatures, like Firms, Are Not Organized as Markets,” Journal of Political Economy 96 (02 1988), pp. 132–63; and Shepsle, Kenneth and Weingast, Barry, “The Institutional Foundations of Committee Power,” American Political Science Review 81 (03 1987), pp. 85104. On bureaucracies, see Moe, Terry, “Politics and the Theory of Organization,” special issue, Journal of Law, Economics, and Organizations 7 (1991), pp. 106129; and McCubbins, Matt and Schwartz, Thomas, “Congressional Oversight Overlooked: Police Patrols Versus Fire Alarms,” American Journal of Political Science 28 (02 1984), pp. 165–79. On history, see North, Douglass, “Government and the Cost of Exchange in History,” Journal of Economic History 44 (04 1984), pp. 255–64; and North, Douglass, “A Transaction Cost Theory of Politics,” Journal of Theoretical Politics 2 (12 1990), pp. 355–67. For applications to international relations, see Yarbrough, Beth V. and Yarbrough, Robert M., Cooperation and Governance in International Trade: The Strategic Organization Approach (Princeton, N.J.: Princeton University Press, 1992).

29. A notable exception to this trend has been Bates's important work. See Bates, Robert, Beyond the Miracle of the Market: The Political Economy of Agrarian Development in Kenya (Cambridge: Cambridge University Press, 1989); and Robert Bates, “Macropolitical Economy in the Field of Development,” in Alt and Shepsle, Perspectives on Positive Political Economy. See also Milgrom, Paul, North, Douglass, and Weingast, Barry, “The Role of Institutions in the Revival of Trade,” Economics and Politics 2 (03 1990), pp. 124.

30. Johnson, , “Political Institutions and Economic Performance,” p. 140.

31. Wade does, however, properly realize that Johnson's “capitalist developmental state” is not a theory but rather a description, and thus Wade modifies Johnson's description to make it more testable. See Wade, , Governing the Market, p. 26.

32. The quotation is from Wade, , Governing the Market, p. 327 n. Nevertheless, this is a potentially grave omission. To give one example, private sector donations and support have helped the KMT in recent elections, and lack of private sector support certainly has weakened the opposition DPP's ability to wage effective political campaigns.

33. Amsden, , Asia's Next Giant, p. 327.

34. Wade, Robert, “Managing Trade: Taiwan and South Korea as Challenges to Economics and Political Science,” Comparative Politics 25 (01 1993), pp. 147–67. See also Evans, Peter, “Predatory, Developmental, and Other Apparatuses: A Comparative Analysis of the Third World State,” Sociological Forum 4 (12 1989). A recent article estimates that the black-market economy in Taiwan comprises 40 percent of the entire economy. See “Buried Treasure,” The Economist, 6 November 1993, p. 37. For seminal works on rent seeking, see Tullock, Gordon, “The Welfare Costs of Tariffs, Monopolies, and Theft,” Western Economic Journal 5 (01 1967), pp. 224–32; Bhagwati, Jagdish N., “Directly Unproductive, Profit-Seeking (DUP) Activities,” Journal of Political Economy 90 (10 1982), pp. 9881002; Ames, E. and Rapp, R. T., “The Birth and Death of Taxes: A Hypothesis,” The Journal of Economic History 37 (01 1977); Levi, Margaret, Of Rule and Revenue (Berkeley: University of California Press, 1988); and Lane, Frederic, Profits from Power: Readings in Protection Rent and Violence-Controlling Enterprises (Albany: State University of New York Press, 1979).

35. Johnson, , “Political Institutions and Economic Performance,” p. 149.

36. According to Wade, “[in Taiwan] the share of manufacturing value-added held by firms with five-hundred employees or more was unusually high by world standards. Firms of that size accounted for 57.9 percent of manufacturing value-added, compared to 52.7 percent in Korea, 48.7 percent in the U.S. and under 40 percent in J a p a n.… In Taiwan, from 1972 to 1979 the share of the top one hundred private manufacturing firms in total manufacturing assets increased from 30 percent to 44 percent.” See Wade, , Governing the Market, p. 68, emphasis original. See also Nugent, Jeffrey B. and Nabli, Mustapha K., “An Institutional Analysis of the Size Distribution of Manufacturing Establishments: An International Cross-Section Study,” working paper no. 8921, Korea Development Institute, Seoul, 08 1989. For a cross-national comparison of public utilities, see Levy, Brian and Spiller, Pablo, “Regulation, Institutions, and Commitment in Telecommunications: A Comparative Analysis of Five Country Studies,” manuscript, University of Illinois, 1993.

37. For an excellent overview of how the NIE may apply to development see Pranab Bardhan, “The New Institutional Economics and Development Theory.” Other good works include Lee, Chung H., “The Government, Financial System, and Large Private Enterprises in the Economic Development of South Korea,” World Development, vol. 20, no. 2, 1992, pp. 187–98; Doner, Richard, “Limits of State Strength: Toward an Institutionalist View of Economic Development,” World Politics 44 (04 1992), pp. 398431; Montinola, Gabriella, Qian, Yingqi, and Weingast, Barry, “Federalism, Chinese Style,” manuscript, Department of Political Science, Stanford University, Stanford, Calif., 1993; Nee, Victor, “Organizational Dynamics of Market Transition: Hybrid Forms, Property Rights, and Mixed Economy in China,” Administrative Science Quarterly 37 (03 1992), pp. 127; Aoki, Masahiko, “Toward an Economic Model of the Japanese Firm,” Journal of Economic Literature 28 (03 1990), pp. 127; and Stiglitz, J. E., “Markets, Market Failures, and Development,” American Economic Review 79 (05 1989), pp. 197203. On Japan, see Ramseyer, Mark and Rosenbluth, Frances McCall, Japan's Political Marketplace (Cambridge, Mass.: Harvard University Press, 1993).

38. On informal credit markets, see Floro, Sagrario L. and Yotopolous, Pan A., “Income Distribution, Transaction Costs, and Market Fragmentation in Informal Credit Markets,” Cambridge Journal of Economics 16 (09 1992), pp. 303–26. On Chinese firms, see Hamilton, Gary and Biggart, Nicole, “Market, Culture, and Authority: A Comparative Analysis of Management and Organization in the Far East,” American Journal of Sociology 94, supplement (1988), pp. S5294.

39. See Orru, Marco, “The Institutional Logic of Small-Firm Economics in Italy and Taiwan,” Studies in Comparative International Development 26 (Spring 1991), pp. 328; and Hamilton, Gary and Biggart, Nicole, “Market, Culture, and Authority: A Comparative Analysis of Management and Organization in the Far East,” American Journal of Sociology 94, supplement (07 1988), pp. S5294. For a critique, see Numazaki, Ichiro, “State and Business in Postwar Taiwan: Comment on Hamilton and Biggart,” American Journal of Sociology 96 (01 1994), pp. 993–97.

40. In all Korea, an estimated eight hundred lawyers work full-time for businesses. See Kim, Hein, “Fighting for Opportunity in a Man's World,” Far Eastern Economic Review, 8 09 1988), p. 97.

41. Equity provides for more internal control within a firm and thus decreases the potential for opportunism. Debt, on the other hand, can increase the capitalization of a firm, but also increases contractual and financial hazards. For a treatment of finance in the NIE, see Williamson, Oliver E., “Corporate Governance and Corporate Finance,” Journal of Finance 43 (07 1988), pp. 567–91.

42. A good example of an analysis of firm size is Aoki, “Toward an Economic Model of the Japanese Firm.” On the legal environment, see Langbein, John, “Comparative Civil Procedure and the Style of Complex Contracts,” American Journal of Comparative Law 35 (Spring 1987), pp. 381–94.

43. For discussion along these lines of thinking, see Cheng, , “Political Regimes and Development Strategies,” especially p. 142. An excellent work comparing Japan with Taiwan is Noble's, GregoryRegimes and Industrial Policy: The Politics of Collective Action in Japan and Taiwan (Ithaca, N.Y.: Cornell University Press, forthcoming). For a comparison of Korean and Taiwanese firms, see Fields, Karl J., “Trading Companies in South Korea and Taiwan: Two Policy Approaches,” Asian Survey 29 (11 1989), pp. 1073–89. See also Amsden, Alice, “Big Business and Urban Congestion in Taiwan: The Origins of Small Enterprise and Regionally Decentralized Industry (Respectively),” World Development 19 (09 1991), pp. 1121–35. For a view of how the Taiwanese state has directed and continues to influence development through land control, see Bishai, M. F., “The Development of Industrial Land in Taiwan: A Legal Framework for State Control,” Journal of Developing Areas 26 (10 1991), pp. 5364.

44. Lew, Seok-jin, “Bringing Capital Back In: A Case Study of South Korean Automobile Industrialization,” Ph.D. diss., Yale University, 1992, p. 246.

45. For discussion regarding Korean chaebol, see Kim, Eun Mee, “From Dominance to Symbiosis: State and Chaebol in the Korean Economy, 1960–1985,” Ph.D. diss., Department of Sociology, Brown University, 1987. For a discussion regarding the initial attempts by Park Chung-hee to influence capital, see Haggard, Stephan, Kim, Byung-kook, and Moon, Chung-in, “The Transition to Export-Led Growth in South Korea: 1954–1966,” Journal of Asian Studies 50 (11 1991), pp. 850–73.

46. See Kim, Eun mee, “The Industrial Organization of the Korean Chaebol: Integrating Development and Organizational Theories,” in Hamilton, Gary, ed., Business Networks and Economic Development in East and Southeast Asia (Hong Kong: University of Hong Kong Press, 1991), pp. 272–99; Janelli, Roger and Yim, Dawnhee, Making Capitalism: The Social and Cultural Construction of a South Korean Conglomerate (Stanford, Calif.: Stanford University Press, 1993); and Kim, Choong Soon, The Culture of Korean Industry: An Ethnography of Poongsan Corporation (Tucson: University of Arizona Press, 1992). For other initial discussions of the Korean chaebol, see Steers, Richard M., Shin, Yoo-Keun, and Ungson, Gerardo R., The Chaebol: Korea's New Industrial Might (New York: Harper and Row, 1989); Park, Byeong-yun, Chaebol gwa Jongchi: Hanguk chaebol songjang paemyonsa (Chaebol and politics: The development of the Korean conglomerates) (Seoul: Hanguk Yonguso, 1982); and Choe, Jang-jip, ed., Hankuk Jabon ju-ui wa gukka (Korean capitalism and the state) (Seoul: Hanwul, 1985). For a work that views the Korean chaebol pejoratively and emphasizes corruption, land speculation, and the clientelistic ties between the state and the chaebol, see Kang, Chol-gyu, Choi, Jong-pyo, and Jang, Jisang, Chaebol: Songjan-ui Juyok inga tamyok-ui hwasin inga (Chaebol: Pivotal role in growth or paragon of greed?) (Seoul: Gyonje Jongui Chonsiminyonhab, 1991).

47. Only now, for example, is it acceptable in Taiwan to discuss some of the crucial developments of early KMT rule. For work on Korean politics, see Jones, Leroy P. and SaKong, II, Government, Business, and Entrepreneurship in Economic Development: The Korean Case (Cambridge, Mass.: Harvard University Press, 1980); Haggard, Stephan and Moon, Chung-in, “Institutions and Economic Policy: Theory and a Korean Case Study,” World Politics 42 (01 1990), pp. 210–37; and Yong, Gwan, “Gwanryojeok Gwonwijuui ui Daedo wa Junghwahak Gongeop Jeongchang” (Emergence of the bureaucratic authoritarianism and policies of the heavy chemical industries), in Han, Sang-jin, ed., Hankuk Sahoe Byeondong gwa Gukka Yeoghwal e Gwanhan Yeongu (Studies on the changes in Korean society and the role of the state) (Seoul: Hyundai Saho Yonguso, 1985).

48. For a good discussion of this topic, see Chu, Yu-han, “State Structure and Economic Adjustment in the East Asian Newly Industrializing Countries,” International Organization 43 (Fall 1989), pp. 647–72. On Taiwan, see Davis, David R. and Ward, Michael D., “The Entrepreneurial State: Evidence from Taiwan,” Comparative Political Studies 23 (10 1990), pp. 314–33; and Amsden, Alice, “Taiwan's Economic History: A Case of Etatisme and a Challenge to Dependency Theory,” Modem China, vol. 5, no. 3, 1979, pp. 341–80. On Korea, see Cotton, James, “Understanding the State in South Korea: Bureaucratic Authoritarian or State Autonomy Theory,” Comparative Political Studies 24 (01 1992), pp. 512–31; and Koo, Hagen, ed., State and Society in Contemporary Korea (Ithaca, N.Y.: Cornell University Press, 1993).

49. Woo, Jung-en, Race to the Swift (New York: University of Columbia Press, 1990), p. 175. Frederic Deyo's remark is representative of the entire field: “Strong, developmentalist states have been important in guiding and orchestrating rapid industrialization in Singapore, South Korea, and Taiwan.” See Frederic Deyo, “State and Labor: Modes of Political Exclusion in East Asian Development,” in Frederic Deyo, ed., The Political Economy of New Asian Industrialism.

50. Writing in 1968, Henderson noted that “The bureaucracy tends to be little hampered by legislative surveillance. Corruption, having fewer checks, again flourished.” See Henderson, Gregory, Korea: The Politics of the Vortex (Cambridge, Mass.: Harvard University Press, 1968), p. 190. For detailed studies of the Korean bureaucracy that tend to emphasize the corrupt aspects, see Kim, Young Jong, Bureaucratic Corruption: The Case of Korea (Seoul: The Chomyung Press, 1986); and Kim, Bun Woong and Bell, David S. Jr, eds., Administrative Dynamics and Development: The Korean Experience (Seoul: Kyobo Publishers, 1985). See also Lee, Hahn-been, Korea: Time, Change, and Administration (Honolulu: East-West Center, 1968); and Whang, In Joung, “Government Direction of the Korean Economy,” in Caiden, Gerald E. and Kim, Bun Woong, eds., A Dragon's Progress: Development Administration in Korea (Hartford, Conn.: Kumarian Press, 1991), pp. 107122. For the conventional wisdom emphasizing an efficient bureaucracy, see Rhee, Yung-whan, Ross-Larson, Bruce, and Pursell, Gary, Korea's Competitive Edge: Managing the Entry into World Markets (Baltimore, Md.: Johns Hopkins University Press, 1984).

51. Bendor, Jonathan, “Review Article: Formal Models of Bureaucracy,” British Journal of Political Science 18 (07 1980), pp. 353395. The quotation is from p. 365.

52. In an intriguing study of machine politics in Chicago, Erie notes that the Irish machine reformed certain sectors of the bureaucracy with an eye toward efficiency. Such reform allowed the machine to capture the resulting efficiency gains for itself. See Erie, Steve, Rainbow's End: Irish-Americans and the Dilemmas of Urban Machine Politics, 1840–1985 (Berkeley: University of California Press, 1988). See also Silberman, Bernard, Cages of Reason: The Rise of the Rational State in France, Japan, the United States, and Great Britain (Chicago: University of Chicago Press, 1993).

53. Park Chung-hee's ascension to power heralded a “clean government,” and toward that end he screened 41,000 government employees, of whom 1,863 were found to be involved in corruption. In 1974, Park purged 331 government officials. In 1979, Chun Doo-hwan formed the Special Commission for National Security Measures and purged 4,760 public officials. See Kim, and Bell, , eds., Administrative Dynamics and Development, p. 63.

54. Kang, Dave, “Profits of Doom: Rent-Seeking, Transaction Costs, and Development,” Ph.D. diss., University of California, Berkeley, 1995. For some excellent studies, see Back, Jong-guk, “Politics of Late Industrialization: Origins and Processes of Automobile Industry Policies in Mexico and South Korea,” Ph.D. diss., Department of Political Science, University of California, Los Angeles, 1990; Choi, Byung-sun, “Institutionalizing a Liberal Economic Order in Korea: The Strategic Management of Economic Change,” Ph.D. diss., Harvard University, 1987; and Kim, Byung-kook, “Bringing and Managing Socioeconomic Change: The State in Korea and Mexico,” Ph.D. diss., Harvard University, 1987.

55. See Moon, Chung-in, “The Demise of the Developmentalist State? Neoconservative Reforms and Political Consequences in South Korea,” Journal of Developing Societies 4 (01 1988), pp. 6784; and Kim, Eun-mee, “Contradictions and Limits of a Developmental State: With Illustrations from the South Korean Case,” Social Problems 40 (05 1993), pp. 223–49.

56. See, respectively, Geddes, Barbara, “A Game Theoretic Model of Reform in Latin-American Democracies,” American Political Science Review 85 (06 1991), pp. 371–92; Fox, Jonathon, “The Difficult Transition from Clientelism to Citizenship: Lessons from Mexico,” World Politics 46 (01 1994), pp. 151–84 and p. 158 in particular. See also Shambayati, Hootan, “The Rentier State, Interest Groups, and the Paradox of Autonomy: State and Business in Turkey and Iran,” Comparative Politics 26 (04 1994), pp. 307–32.

57. Eckert, Carter, Offspring of Empire: The Koch'ang Kims and the Colonial Origins of Korean Capitalism, 1876–1945 (Seattle: University of Washington Press, 1990). Eckert is a historian at Harvard University and director of the Korea Institute. For another excellent book on a similar topic, see McNamara, Dennis, The Colonial Origins of Korean Enterprise, 1910–1945 (Cambridge: Cambridge University Press, 1990).

58. On Taiwanese history, the classic remains Ho, Samuel P. S., Economic Development of Taiwan, 1860–1970 (New Haven, Conn.: Yale University Press, 1978). For a comparative study of Japanese colonialism, see Myers, Ramon and Peattie, Mark, eds., The Japanese Colonial Empire, 1895–1945 (Princeton, N.J.: Princeton University Press, 1984). Other works include Pang, Chien-kuo, The State and Economic Transformation: The Taiwan Case (New York: Garland, 1992); and Lin, Chin-yuan, Industrialization in Taiwan, 1946–1972 (New York: Praeger, 1973).

59. It may be more fair to say that some scholars focus their attention on the 1960s. For example, Amsden briefly discusses the historical origins of the Korean state-business relationship but quickly moves on to an analysis of the successful policies followed from the 1960s onward. See Amsden, , Asia's Next Giant, pp. 2554.

60. Koo, , “The Interplay of State, Social Class, and World System in East Asian Development,” p. 167. This is not so clear, even in the Taiwanese case. To give a very minor example, city planning in Taipei still uses 1930s Japanese colonial principles as a guide in laying out and directing growth.

61. Cheng, , “Political Regimes and Development Strategies,” p. 146. Other excellent work on the Japanese influence or legacy in Korea are the following works by Cumings, Bruce, Origins of the Korean War, 2 vols. (Princeton, N.J.: Princeton University Press, 1981 and 1989, respectively); and “The Origins and Development of the Northeast Asian Political Economy.” See also Myers and Peattie, The Japanese Colonial Empire.

62. Eckert, , Offspring of Empire, p. 65.

63. Ibid., pp. 46–49.

64. Ibid., p. 192.

65. Ibid., p. 125. Dennis McNamara argues similarly: “Adaptation to government economic direction, credibility with the administration, and close contacts with present and former government officials were prerequisites for successful large-scale enterprise in the colony.” See McNamara, , The Colonial Origins of Korean Enterprise, 19101945, p. 48.

66. Eckert, , Offspring of Empire, chap. 7 and p. 142.

67. Eckert falls firmly within the group of scholars that sees Japan as a model for Korea. See Eckert, , Offspring of Empire, p. 255. See also Cline, William R., “Can the East Asian Model be Generalized?World Development 10 (02 1982), pp. 8190; Robert Kaufman, “How Societies Change Development Models or Keep Them: Reflections on the Latin American Experience in the 1930s and the Postwar World,” in Gereffi and Wyman, Manufacturing Miracles; and Hamilton, Clive, “Can the Rest of Asia Emulate the NICs?Third World Quarterly 87 (10 1987), pp. 1225–56.

68. McNamara, , The Colonial Origins of Korean Enterprise, 1910–1945, p. 127.

69. Ahn, Yeonmi, “The Political Economy of Foreign Aid: The Nature of American Aid and Its Impact on the State-Business Relationship in South Korea, 1945–1972,” Ph.D. diss., Yale University, New Haven, Conn., 1992, p. 167. See also Woo, Race to the Swift, chap. 3; and Krueger, Anne O., Economic Policies at Cross-Purposes (Washington, D.C.: Brookings Institution, 1993).

70. This is not strictly true. Taiwan was part of China from 1644 to 1895, and before 1644, it lay under Dutch rule. Nevertheless, Taiwan was incorporated into and a part of a recognized sovereign entity.

71. Gregory, Henderson, , Korea, p. 25.

72. North, Douglass and Thomas, Robert, The Rise of the Western World (Cambridge: Cambridge University Press, 1973). McNamara emphasizes kinship ties and business networks as limiting colonial risks and inducing investment. See McNamara, , The Colonial Origins of Korean Enterprises, 1910–1945, pp. 135–36. See also Gulati, Umesh C., “The Foundations of Rapid Economic Growth: The Case of the Four Tigers,” American Journal of Economics and Sociology 51 (04 1992), pp. 161–72.

73. Eckert, , Offspring of Empire, p. 254 and nn. A study conducted in the 1970s by the Harvard Development Institute sampled three hundred businessmen and found that 47 percent were the sons of large-to-medium landowners and that it was primarily the larger landowners who had produced entrepreneurs. See Jones, Leroy P. and Sakong, II, Government, Business, and Entrepreneurship in Economic Developmen: The Korean Case (Cambridge, Mass.: Harvard University Press, 1980), p. 228.

74. Eckert, , Offspring of Empire, p. 59.

75. The figures are taken from Km, Eun mee, “From Dominance to Symbiosis,” p. 93. For an excellent study on the historical dimensions of the proletarian class in Korea, see Koo, Hagen, “From Farm to Factory: Proletarianization in Korea,” American Sociological Review 55 (10 1990), pp. 669–81, especially pp. 671–73.

76. Haggard, , Pathways from the Periphery, p. 31. Two works that focus on the international system are Cumings, “The Origins and Development of the Northeast Asian Political Economy”; and Woo, Race to the Swift, especially chapter 5.

77. See Gerschenkron, Alexander, Economic Backwardness in Historical Perspective (Cambridge, Mass.: Harvard University Press, 1962).

78. Wade, Governing the Market, chap. 5.

79. Waltz, Kenneth, Theory of International Politics (New York: Random House 1979), p. 154.

80. See, for example, Kindleberger, Charles, “Dominance and Leadership in the International Economy: Exploitation, Public Goods, and Free Rides,” International Studies Quarterly 25 (06 1981), pp. 242–54; and Snidal, Duncan, “The Limits of Hegemonic Stability Theory,” International Organization 39 (Autumn 1985), pp. 579614.

81. In 1960, South Korea devoted 35 percent of government spending to defense, while Taiwan had an army of 600,000 men. According to the Asia Yearbook 1965, in Taiwan 69.08 percent of central government expenditure for fiscal year 1965 was devoted to the military, a number that seems remarkably high. These figures were derived from Far Eastern Economic Review, Asia Yearbook 1961 (Singapore: Far Eastern Economic Review, 1961), pp. 154 and 161; and Far Eastern Economic Review, Asia Yearbook 1965 (Singapore: Far Eastern Economic Review, 1965), p. 281.

82. See, for example, Ward, Michael D., Davis, David R., and Chan, Steve, “Military Spending and Economic Growth in Taiwan,” Armed Forces and Society 19 (Summer 1993), pp. 533–50; Park, Kun Y., “Pouring New Wine into Fresh Wineskins: Defense Spending and Economic Growth in LDCs with Application to South KoreaJournal of Peace Research 30 (02 1993), pp. 7993; and Deger, Saadet and Smith, Ron, “Military Expenditures and Growth in Less Developed Countries,” Journal of Conflict Resolution 27 (06 1983), pp. 335–53.

83. Jung-en Woo gives the external threat and the U.S. involvement in Korea a central place in her work. See Woo, Race to the Swift, especially chaps. 3 and 4. For an initial discussion along these lines, see Kang, Dave, “Security Dilemmas, Transaction Costs, and Trade: The Case of South Korea,” paper presented at the annual meeting of the American Political Science Association, New York, 1–4 09 1994. For work in this vein on Western Europe, see North, Structure and Change in Economic History. The idea of nesting economic policy decisions within a larger security context has been emphasized by Aggarwal. See Aggarwal, Vinod, Liberal Protectionism: The International Politics of Organized Textile Trade (Berkeley: University of California Press, 1985).

84. China and Taiwan have engaged in sporadic engagements since the KMT's takeover of Taiwan. For some accounts of these engagements and Taiwan's and Korea's defense policies in general, see Gregor, A. James and Chang, Maria Hsia, The Iron Triangle: A U.S. Security Policy for Northeast Asia (Stanford, Calif.: Hoover Press, 1984), especially p. 83.

85. Yoo, Jung-ho, “The Industrial Policy of the 1970s and the Evolution of the Manufacturing Sector in Korea,” working paper no. 9071 Korea Development Institute, Seoul, 10 1990, p. 19. For an overview of the military's role in Korean development, see Huer, John, Marching Orders: The Role of the Military in South Korea's “Economic Miracle,” 1961–1971 (New York: Greenwood Press, 1989); and Graham, Norman, “The Role of the Military in the Political and Economic Development of the Republic of Korea,” Journal of Asian and African Studies 26 (04 1991), pp. 114–31.

86. Yoo, , “The Industrial Policy of the 1970s and the Evolution of the Manufacturing Sector in Korea,” p. 19. See also Kim, Ju-Hoon et al. , “Juyosanobui Donghyang, Jonmanggua Guaje” (Trends in major industries, perspectives and prescriptions), working paper no. 91–03, Korea Development Institute, 04 1991; and Gye-Sik Lee, “Bokjigukgaui Jongewa Bokji Jaewon Jodal Jongcheck.”

87. Hagen Koo writes, “As bastions of the anticommunist struggle, South Korea and Taiwan both received enormous amounts of US aid and military assistance.” See Koo, , “The Interplay of State, Social Class, and World System in East Asian Development,” p. 167.

88. Ibid., p. 168. For other accounts of this pressure on Taiwan, see Zenger, J. P., “Taiwan: Behind the Economic Miracle,” AMPO: Japan-Asia Quarterly Review 9 (01 1977), pp. 7991; and Little, Ian D., “An Economic Renaissance,” in Galenson, Walter, ed., Economic Growth and Structural Change in Taiwan (Ithaca, N.Y.: Cornell University Press, 1979), pp. 448508.

89. See Haggard, Stephan and Cheng, Tun-jen, “State and Foreign Capital in the East Asian NICs,” in Deyo, , The Political Economy of the New Asian Industrialism, pp. 84135 and p. 111 in particular; and Cumings, Bruce, “The Origins and Development of the Northeast Asian Political Economy,” p. 26, respectively. Additionally, Edward Mason et al. write that in Korea the reforms were basically dictated by the United States, while Ian Little argues that U.S. influence in the Taiwanese case is one of the “clearest examples in economic history of cause and effect.” See Mason, Edward et al. , The Economic and Social Modernization of the Republic of Korea (Cambridge, Mass.: Harvard University Press, 1980); and Little, Ian, “An Economic Renaissance,” p. 474.

90. Katzenstein, Peter, Small States in World Markets: Industrial Policy in Europe (Ithaca, N.Y.: Cornell University Press, 1983), pp. 24 and 41.

91. For work on recent moves towards creating regimes in Asia, see Aggarwal, Vinod K., “Building International Institutions in the Asia-Pacific,” Asian Survey 33 (11 1993), pp. 1029–42.

92. Mardon, , “The State and Effective Control of Foreign Capital,” p. 137. See also Barbara Stallings, “The Role of Foreign Capital in Development,” chap. 3 in Gereffi and Wyman, Manufacturing Miracles.

93. Wade, , Governing the Market, p. 113.

94. For a discussion of Taiwan's international economic policy, see T. H. Lee and K. S. Liang, “Taiwan,” in Balassa, Development Strategies in Semi-industrial Economies, chap. 10; and Gold, Thomas, State and Society in the Taiwan Miracle (Armonk, N.Y.: M. E. Sharpe, 1986).

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