Week 7 - Developmental States in Comparative Perspective

Question 1

What is the mainstream explanation of the early neoclassical assessment of Taiwan and South Korea?

Answer 1

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

Question 2

What did the World-Bank attribution of the “developmental states” stay within?

Answer 2

stayed within the bounds of neoclassical economics’ prescriptions

Question 3

One of things the “developmental states” did was industrial policy, what did this involve?

Answer 3

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

Question 4

One of things the “developmental states” did was industrial policy, what did this involve for South Korea and Taiwan?

Answer 4

South Korea (cement, steel, shipbuilding, machinery)
Taiwan state corporations (petrochemicals, metals and power generation)
both willing to take risks

Question 5

One of things the “developmental states” did was agriculture policy, what did this involve?

Answer 5

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))

Question 6

One of things the “developmental states” did was state control of finance, what did this involve?

Answer 6

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

Question 7

One of things the “developmental states” did was state control of finance, what did this involve for Korea and Taiwan?

Answer 7

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

Question 8

One of things the “developmental states” did was macroeconomic stability, what did this involve?

Answer 8

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

Question 9

One of things the “developmental states” did was income policy, what did this involve?

Answer 9

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

Question 10

One of things the “developmental states” did was social policy, what did this involve?

Answer 10

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)

Question 11

What is a summary of what the “developmental states” did to succeed?

Answer 11

prioritise growth
private property/market allocation
elite economic bureaucracy
institutions/organisations
bureaucrats rule while politicians reign

Question 12

What did the state do in the “developmental states” to succeed?

Answer 12

ensured high levels of productive investment and fast technological transfer
ensured key industries
ensured competition

Question 13

What were possible causes of the “developmental states” success? (4)

Answer 13

colonial legacy
US foreign aid
historical point
cultural explanations

Question 14

One of the possible causes of the “developmental states” success is colonial legacy, what did this involve?

Answer 14

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)

Question 15

One of the possible causes of the “developmental states” success is US foreign aid, what did this involve?

Answer 15

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)

Question 16

One of the possible causes of the “developmental states” success is historical point, what did this involve?

Answer 16

when ISI was accepteable
(counterpart is that confucian mentality earlier seen as barrier and ethnic composition did not change)

Question 17

One of the possible causes of the “developmental states” success is cultural expectations, what did this involve?

Answer 17

confucianism and ethnic homogeneity
(counterpart is that confucian mentality earlier seen as barrier and ethnic composition did not change)

Question 18

What was “systematic vulnerability” in the developmental states?

Answer 18

political elites were staring down the “barrels of three guns”

Question 19

What are the “barrels of three guns” that were the “systematic vulnerability” in the developmental states?

Answer 19

(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

Question 20

Was land reform under Rhee an act of a developmental state?

Answer 20

No, but helped establish the conditions for a developmental state to emerge

Question 21

What were the internal and external threats South Korea faced and what did this lead to? (land reform)

Answer 21

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

Question 22

Why did Latin America not have sustained industrial growth?

Answer 22

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)

Question 23

Why did SSA not have sustained industrial growth?

Answer 23

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”

Question 24

Comparing Malaysia, Thailand and Indonesia, which did better?

Answer 24

Malaysia and Thailand did relatively better than Indonesia

Question 25

What role did states play in NICs compared to SEA?

Answer 25

state played some role in finance and directing credit

Question 26

What type of finance was relied on in NICs compared to SEA?

Answer 26

all encouraged domestic savings to finance investment, but relied much more heavily on FDI

Question 27

Why did Malaysia have less effective industrial policies than other NICs?

Answer 27

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)

Question 28

What type of income distribution was in NICs compared to SEA?

Answer 28

worse on income distribution

Question 29

Why did the NICs not perform as well as SEA?

Answer 29

none were subjected to the same "systemic vulnerabilities" as South Korea and Taiwan

Question 30

What are the "developmental states" like today?

Answer 30

"developmental states" have not reinvented themselves and have not become neoliberal states

Question 31

What are three summary points of why "developmental states" performed well?

Answer 31

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

Question 32

What did it mean that the Northeast Asia (e.g. South Korea) state were interventionist?

Answer 32

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)

Question 33

What did the World Bank and neoliberal economists say the main lesson to be learned from the East Asian NICs is?

Answer 33

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)

Question 34

What is the main reason for the success of NICs?

Answer 34

largely a result of the crucial role played by the state, which also at times involved selective protectionist policies

Question 35

What was agrarian reform in East Asia like?

Answer 35

was political in both countries, not economic

Question 36

What did South Korea need to do to stabilise the new republic politically?

Answer 36

overriding need to neutralise communist influence and reduce class conflicts to stabilise the new republic politically

Question 37

What was the East Asian model?

Answer 37

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)

Question 38

What was the Latin American model?

Answer 38

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)

Question 39

What was the East Asian agrarian reform?

Answer 39

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)

Question 40

What was the Latin American agrarian reform?

Answer 40

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

Question 41

What was the industrialisation timing between East Asia and Latin America?

Answer 41

Latin America started much earlier, but fell behind

Question 42

How was the East Asian agricultural surplus?

Answer 42

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)

Question 43

How was the Latin American agricultural surplus?

Answer 43

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)

Question 44

How was the East Asian export-oriented industrialisation?

Answer 44

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)

Question 45

What type of industrialisation did East Asia undertake?

Answer 45

export oriented industrialisation

Question 46

What type of industrialisation did Latin America undertake?

Answer 46

import substitution industrialisation

Question 47

How was the Latin American import substitution industrialisation?

Answer 47

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)

Question 48

How was the East Asian state capacity?

Answer 48

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)

Question 49

How was the Latin American state capacity?

Answer 49

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)

Question 50

How was the East Asian landlords?

Answer 50

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

Question 51

How was the Latin American landlords?

Answer 51

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)

Question 52

How did surplus labour in East Asia work?

Answer 52

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

Question 53

What were the East Asian unequal terms of trade?

Answer 53

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)

Question 54

What East Asian equitable outcomes are seen?

Answer 54

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

Question 55

What Latin American unequitable outcomes are seen?

Answer 55

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

Question 56

Why did Latin America fall behind South Korea and Taiwan?

Answer 56

neglect of agricultural exports together with failure to shift at an earlier stage to an export-orientated industry strategy

Question 57

What are the main differences between South Korea and Taiwan and Latin America?

Answer 57

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)

Question 58

What is a summary of the successes East Asia managed?

Answer 58

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)

Question 59

What are the East Asian critiques?

Answer 59

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)

Question 60

What are developmental states?

Answer 60

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

Question 61

Are developmental states common?

Answer 61

No, they are rare

Question 62

When will political elites build developmental states?

Answer 62

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)

Question 63

What are the broad coalition commitments (one of the systemic vulnerabilities)?

Answer 63

the credible threat that any deterioration in the living standard of popular sectors could trigger unmanageable mass unrest

Question 64

What are the severe security threats (one of the systemic vulnerabilities)?

Answer 64

the heightened need for foreign exchange and war material induced by national insecurity

Question 65

What are the scarce resource endowments (one of the systemic vulnerabilities)?

Answer 65

the hard budget constraints imposed by a scarcity pf easy revenue source

Question 66

What does addressing the simultaneous presence of all three conditions of the systemic vulnerabilities require?

Answer 66

strong institutions

Question 67

What are narrow coalitions?

Answer 67

favour limited elite interests

Question 68

What are broad coalition commitments?

Answer 68

force governments to consider the welfare of larger social groups side payments had to be economically sustainable and promote productivity rather than mere consumption

Question 69

What are security threats?

Answer 69

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)

Question 70

What are resource constraints?

Answer 70

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)

Question 71

What were the Northeastern NICs institutions like?

Answer 71

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)

Question 72

What were the Southeast Asian ASEAN-4 like?

Answer 72

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

Question 73

What is a summary of South Korea and Taiwan and systemic vulnerabilities?

Answer 73

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)

Question 74

What is a summary of Thailand, Malaysia, Indonesia and Philippines and systemic vulnerabilities?

Answer 74

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

Question 75

What are the unique conditions regarding developmental states?

Answer 75

developmental states emerge under rare conditions when ruling elites are rightly constrained by systemic vulnerabilities

Question 76

In developmental states, who do the governments work closely with?

Answer 76

the private sector

Question 77

What was foreign support in South Korea and Taiwan related to?

Answer 77

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)

Question 78

What were the anti-developmental forces hampering development in Asian and Latin American countries?

Answer 78

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)

Question 79

What were the effects of external factors in developmental states?

Answer 79

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

Question 80

What characterizes crony capitalism as described by Putzel?

Answer 80

A network of businessmen with connections to the president, gaining wealth through non-productive personal fortunes domestically and internationally

Question 81

What were the central features of superior performance in developmental states?

Answer 81

High levels of productive investment, transfer of techniques into production, investment in key industries, and exposure to international competition

Question 82

What was the impact of state control over finance in developmental states?

Answer 82

It gave the state leverage to direct private investment into priority industries and subordinated financial capital to industrial capital

Question 83

What strategies were included in the industrial policies of developmental states?

Answer 83

Promoting strategic industries, limiting foreign competition, prioritizing scarce foreign exchange, and supporting technology acquisition

Question 84

How did developmental states support agriculture?

Answer 84

Through land reform, infrastructure investments, and agricultural protection, enabling steady labor flows to industry

Question 85

What was the purpose of incomes policies in developmental states?

Answer 85

To align wage increases with productivity, creating equitable income distribution while suppressing social organisations

Question 87

How did Malaysia stabilise its economy during the crisis?

Answer 87

By imposing capital controls, allowing control over interest rates and public spending

Question 87

How did liberalisation impact Southeast Asia's economic systems?

Answer 87

It accelerated cronyism by giving politically connected private groups access to international capital and increased vulnerability to external shocks

Question 88

Why did Southeast Asia struggle to replicate Northeast Asia’s success?

Answer 88

It lacked strong state involvement, comprehensive land reforms, and coherent industrial policy, relying more on FDI

Question 89

What role does the state play in the globalized and liberalised economy?

Answer 89

The state remains crucial, especially during crises, to stabilize economies and manage global and local economic challenges

Question 90

What is the main argument of Haggard, Moon, and Kang regarding Korea's growth under Japanese colonialism?

Answer 90

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

Question 91

What do revisionists claim about Japanese colonialism's impact on Korea's development?

Answer 91

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

Question 92

How do the authors critique the revisionist claims?

Answer 92

They contend that growth under Japanese rule was modest, uneven, and lacked enduring benefits, with most colonial-era achievements reversed post-independence

Question 93

How did agriculture fare under Japanese rule in Korea?

Answer 93

Growth in rice production benefited Japan at the expense of Korean farmers, while productivity in other agricultural sectors stagnated or declined

Question 94

What was the state of industrialization under Japanese colonialism?

Answer 94

Industrial growth was concentrated in Japanese-owned firms, with over 90% of industrial capital controlled by Japanese entities by 1940, limiting Korean participation

Question 95

What were the effects on employment and wages during the colonial period?

Answer 95

Industrial employment remained minimal, real wages declined, and postwar economic collapse erased most colonial-era physical and institutional legacies

Question 96

How did post-independence governance utilize the colonial bureaucratic structure?

Answer 96

It was repurposed for patronage and rent-seeking by nationalist and political elites

Question 97

What reforms followed the 1961 military coup in Korea?

Answer 97

Structural reforms under Park Chung Hee emphasized export-oriented industrialization and a meritocratic civil service

Question 98

Did Korean firms and entrepreneurs from the colonial period play a significant role post-independence?

Answer 98

A minority did, but most leading firms of the post-1960s export boom were established after liberation, benefiting from domestic policies and US aid

Question 99

How did Japanese colonial social policies affect Korean society?

Answer 99

Landlord-tenant relations and labor practices exacerbated inequality and unrest, while educational policies restricted Korean identity and mobility

Question 100

What social advances occurred post-independence?

Answer 100

Land reforms and expanded educational opportunities improved social mobility and human capital in the 1950s and 1960s

Question 101

How did the Japanese colonial model differ from Korea’s post-independence development?

Answer 101

The colonial model prioritized extractive and imperial goals, while post-independence policies focused on addressing inequalities and fostering sustainable growth

Question 102

What do the Haggard and Kang conclude about Korean economic success?

Answer 102

It was rooted in post-independence policy shifts, with political independence enabling reforms that addressed inequalities and inefficiencies