Political Economy of Taiwan and S Korea
– East Asian Model
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East Asian Model
The so-called East Asian model of
economic development was actually a
model created by Japan in post-WWII,
which has become one of the most
interesting topics in the fields of political
economy and comparative politics.
Main characteristics of
East Asian Model
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1. Corporatist Developmental State
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2. Export-led Economic Development
Strategy
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3. State policy and intervention
1. Corporatist Developmental State
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The state intrudes into detailed operations of
individual enterprises with various measures
intended to promote national industrial policies.
For example, Japan:
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The Ministry of International Trade and Industry
(MITI) and the Ministry of Finance
Corporate conglomerates, such as Mitsui, Mitsubishi,
Sumitomo, Fugo, Sanwa, Dai Ichi Kangyo Bank,
Toyota, and Hitachi
Differences between free market economy and
“corporate developmental state”
Free Market Economy Corporatist state economy
1. Free market economy
emphasizes the efficient
allocation of resources as the
principal force for growth
Corporate developmental state
emphasizes the capital
accumulation as the principal
force for growth.
2. Free market economy
emphasizes the market forces of
supply and demand in a pluralist
society as the supreme arbiter of
economic decisions, and not
government, in determining who
are producers, and what and
where to produce.
Corporatist developmental state
emphasizes the corporatist
relations between the state and the
private sector as the supreme
arbiter of economic decisions to
ensure individual economic
decisions in line with a long-term
national goal or interest.
Differences
Free Market Economy
Corporatist state economy
3. Free market economy
emphasizes that pluralist
societies look favorably on
inter-group conflict as a
stimulus to healthy
competition and
innovativeness, and conflict
is resolved through the open
and fair competition in free
marketplaces or at the ballot
box.
However, in strong corporatist
states like Japan or Sweden,
corporatist societies rely on
inter-group negotiations to settle
conflict, and each group would
try to find accommodation with
other groups in conflicting
positions and look for
compromises.
Differences
Free Market Economy
Corporatist State Economy
4. Free market economy
emphasizes the individual
rights and freedom in
pursuit of self-interest and
wealth and looks at the
individual freedom and
choice as the supreme
value in promoting a
sustainable economic
development and longterm economic prosperity.
Corporatist developmental state,
however, emphasizes the cooperative
public-private relations as the basis
for state’s market guidance and the
favorable environment for a
sustainable economic development,
because only in such a corporatist
relationship can the state have
enough autonomy to influence the
allocation of resources in line with a
long-term national interest, which is
often in conflict with short-term profit
maximizing of private actors.
2. Export-led Economic
Development Strategy
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Such a strategy seeks rapid industrialization
initially by exporting relatively cheap products of
labor intensive industries, such as textiles, and
then by exporting higher value-added products
of more capital-intensive industries, such as iron
and steel, shipbuilding, and machinery, and
finally by exporting more products of technologyintensive industries.
Examples:
3. State policy and intervention
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The first is the practice of targeting the “strategic”
sectors and firms for state special support starting
with labor-intensive sectors;
The second is a neo-mercantilist trade policy of
maximizing exports and minimizing imports;
The third is the state attempt to establish the
parameters, rules, priorities, and infrastructures for
the harmonious integration of the component parts of
the society and the economy to achieve the common
good of the whole society while each of the
component parts is self-motivated and self-managing
within state-initiated, organic structures.