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    JaponDragonesCrecimientoEstado Wade88

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    of 18
    arises particularly through the technology and to industrial-country markets. The extent and way in impact benefits the host country is heavily influenced by policies adopted in those countries. Host country policies largely determine the volume of foreign direct investment they wish to obtain and its effects on the economy, not by special foreign invest- ‘ment ‘incentives’, but by their basic economic ‘rules of the game’. Hy! ROBERT WADE* 5 THE ROLE OF GOVERNMENT IN OVERCOMING MARKET FAILURE: TAIWAN, REPUBLIC OF KOREA AND JAPAN Governments ought not to give more incentives to some industries than to others, except to overcome inherent market failure. Inherent market failure is uncommon, even in developing countries. Most apparent market failures are policy induced; they arise from government action or inaction —action to restrict market access, or failure to establish a capital market, for example. The appropriate role of government is therefore to help create and sustain an economic environment in which price signals drive in- dustrial change. This it can do by adopting a neutral policy regime, a free trade (or almost free trade) regime and a unable to impose ‘political’ prices. ical evidence for the validity of this proposition comes from the contrast between the East Asian developing countries and Japan, on the one hand, and most of the rest of the developing world, on the other. The superior economic perform- ance of the East Asian capitalist countries has gone with a rela- tively neutral policy regime; the inferior economic performance elsewhere went with varying degrees of distortions. The causality is from distortions, or lack of them, to results. ‘That, [ believe, is a fair summary of the central interpretation of the East Asian experience by neo-classical development econ- + This paper i based on parts ofa book-length manuscript, called Sweet and Sour ym: Industrial Policy Taiwan-style. The views expressed are my own and “country” purely for expositional convenience. I'acknowledge with gratitude the ‘Bienefeld, Colin Bradford, Roa Dore ard Paul Strecten: and am grateful for discussions with Stephan Haggard, Chalmers Johnson, Larry ‘Westphal and Frank Veneroso. s201zg “soutes pue aouid yo suuzay mt {(Buons Sunaduios suonnmnsut Tepueuy pazqerods jo Joquma 9812] v pur ‘suownnsur JoxseU -Aouour pie jentdeo yo o8ues opt e st 91914], “souruy ssauysnq UO} ~Buo] Jo sounos uyeum om are (spuog pur sy2018) somumnoes ‘wroIsks 2yFeUL peNded & UT “ssoUrsNq 19A0 syUeQ JO/pue sjuoUTUI2AO8 Jo souangur jentuaiod amp 203 suoneondust wwasojrp Azan axey surayshs josod4s oma au “sworshs reoueuy paseq-uIpoio pure paseq-joyzeut Tedes usoaaq uonsunstp (egg) s,uews Uueysy 1seq at) Ur pazzeos oq 01 siyatiag 19U jenuaIod asain pamoyte ‘ney Yorym suoNIpUoD axp Inoge Ise J Aijeuty “soueULIO}IOd cut souadns 0} painquyucs 1e) u! ‘xp eM Ystigerso assy [eYs | “JOMsUUE OANEIUD UMO AuI JO IHD -uoduros mas e ktuo ontd weo | saded snp uy “uonesapisuco snouas oxy suonsanb asaqy apnpxa o1 sptiay sonmouosa mowdojar ferep wueagyo1 Jo sanynayyip yeonsesd ayy Jo asneoaq Afured Aquo st st, jopied otwouose 3s2q ay YIM AnUNOD ay ~ 2(2) pure (q) *(2) waanoq st 281 uonsanb ayy ‘uonanposd AZojouysas s9y31y spremo} Awo muauumas05 Jo 204 241, Boos orp Jo Surumonnsax pider 01 wodsay pu Aiquiou - souewLOy tad ommouosa souradns (0) 01 adsar yNUM sone UTS BUPAINS MOUS. ‘zamoo Jo ‘oste Katy ,’swoMyNsuT pue sitoumusur t10q 03 y90dso1 Tyua sonues ZopIINs MOGs saNp UEISY Ise OWL, “A110 ot. usa ruowood sofem MNO inva SqU Jo pure ‘areas a4 Jo wonezTueBI0 Jo pury ureyT20 e (q) pure ‘st aSUY fatjod Jo 398 Inyromod & (e) uodn sysox Ajoedeo sip exp pur ‘uonuaaxarut Jano +19810} Aupedeo padoyonap jjom Atfensnun ue oneq weder pue ea1034 Jo onqnday ‘wemrey, jo stioumuono# om req st woUINdze yy “uoneooye somosox aauup seudis yoyzeu Sumo] pur yu seousd om Suma8, Jo uondussoad atp 01 yo"q sn saysnd youre ayy Jo isnayp OU, “aMIrey [eWaWUIaA08 Jo YaxreU!-UOU ‘2aysuatxo 320dx9 prom auo ftp SuoseaI Jo soL2s 2foym B sapiaord vein £q parexouo# sisoo euonippe ox suede saqur ywots9A08 30 aanour v ysyqerse Aeur aime} Y29eUH OTT seqp iurod ofqisuas Apuouraro amp soyeur sane] au, “(6Z61 310M) 2un aatun Aqjenba we Xq pauayisuons ssaATUM UY peu St SuLz2350} Bre OYE, “JOYsEUE ay apmnd 1"Wuno13 (.ssouerswnarp amp ur a|qvurene 399, 10) pides 10] uontpueo Aznsso00u w 10U st uO BaeIp st uopesndut amp ‘pardacoe st iuauinSze sup Jf “ant Ajeuonewxaqut swooeq exey sousnput asomp jo AueUE YEN asus ‘ayy ut fos éqmnyssaoons pure ‘sounnsnput wou AueU Jo wzowdo}oA2p stp poiaisoy Aqaanse qe avy fat, ‘potrad zem-ysod ayy 19A0 oust3ox foyod jennou 01 uoneunxoidde aso e paureureut you oxy roto Jo onqnday sip pue uemrey, ‘ueder “sejnoryzed uy “stoyto Ut Suorm ‘andze J “ose stat ‘si2adsa3 WHOS Ut Yoa2H09 S11 9]yAA “S9TWIO pisy isog wt corporate debUequity ratios were in the 300-400 per ce raises the prospect of immediate liqui- dependent on whoever controls banks are the main supp autonomous of the government, as y's investment pattern. credit-based financial systems, ices. Firms’ dependence on Japan over the 1950s and up to the 1970s, much the same in the Re- other developing countries. ‘might be one of Korea and Taiwan; cof 100-120 per: public of Korea over the 1970s, and 160-200 per cent in Taiwan il and Mexico, for example, had a over the 1970s.? But such compari bypass them by using a first approximation argument in what follows, recognizing tha: it financing, and the banks are by far the most important source of credit.’ All three governments have been wary of allowing a rapid reaches far ly denationalized banks in terms of pet- ', appointment of senior managers, range of services, In Japan the banks are mostly privately owned, but which to expand their lending. They borrow enormous amouats from the central bank, not as aright but as a obliga to respect the central bank's conditions for the al‘o- nding. In all three cases government sets interest and lateral requirements, ‘Thus the three governments seem to have been more than happy to do little to overcome capital market failure, and have even en- . (Firms themselves have tended ‘going public, sing control.) Are there advantages t credit-based model, despite its being less mark ‘The first advantage is that a credit-based system per investment in developing country conditions faser 1n would be possible s' own profits or on markets. Increasesin abongon WB Syn 04 "SHE UAE SIL pue 918018 2880] JO St x9 232 S120) 0 auios 1uous wos az1p1005, 559] mo1IOg ‘ney yoruin pue “pazieas 9q 0} o1e soferueape 20m Jen yore VoNDe yuowUzeK08 Joy soanexodu 30 *ao9 wa}sKs e tons “s9A9MOHT "worsKs feueuy soUd-paraIsUTUIPE ‘poseq-uposo & jo sofeueape tenuaiod sofeu ano} aye as2K, “uyeigo ‘os ynayip yp2% puy Kew stuouoddo rex, afpayrouy fq rw9M suroxod iq Jussoddo wor popenssip axe sustg “ABayeNs [esND uy at jo woponuauaydiuy Burdfay smu ~ soanoa{qo $,.u2urUI9K08 faq) toddns 0} popaau suoniteoa yers0s atp dn pying 0} sajiuno> ‘amyy fe uy posn udaq sey “Su poSeran2] AqyBty J2A0 saUay 5) J9n0 onto jod w snmbas AB bd ep ea owen ya im pauss0u09 aap awosaq a10j2io4) sou, “Uo os nuod ‘sionposd wou Sudojenap s} Aued fam moyy uo puadap asoxp pus “usa BuO] a4X 12A0 SUCO| (ge pe a1zys 129rew! $Auedwi09 oy ynoqe pows22u0D 56 op 0} Kuedisoo Suywos10q 2th spaau sOUNpaxD at, “waAshs rong Supgem-UoIsTap Ai ‘w0q 4x9 pue Anya axoun‘szefoud dun 2810) 6 5 Aouode ay) "5989 Ano Jo 2ostp TE Wl se “210 smiaduy og Bav0x Jo onanday omy pue weayey, 2 uariyj 40 pousszs s2pun sound wy pur ‘e2!0%, Due UeAIEL a9 ‘SowoUoDd suapuedep-epeu ut Suo seo 1299 WSky wat utoUOD9 Ue UL BurAes pL 40 sqsu au) Jo 2Ul0s J9pInoys 01 1weLIULaAO8 Jo} sni> : fod 10 ‘sjoxteu Yodxs soleus uy sofuey { ‘230ya1ayp a ;pasodx2 axe s101798 Jo | paradion fqy8ry 30 2509 amp ut Kjetzods9 “sou 99 uo yumos3 souDy pue uaUnsaA! suvo] Jo puewop pue Ajddns 2x) B08 $20p 1UDUIIDAGS amp 31 “p2s0d cord kunbopgap wiry pure sx9puot Hora. oF {SH ON “ex9Ao8 01 Uo ays 01 ~ SSoI a1eAtsd Jo Sy 34 J0 2 ‘1 azom quomnusoned ap Je ey 559} pa} oF 314Eg PUN (0 Ajay ate sung ‘s108sep ons 2569 05, “ymos8 10% re) eure 50 emespy ——— ait ‘urea quazane uy soULpap 01 21qe32U ‘asneoaq sf SUL, “ASH ezi[e120s Oo} somsvous anoyM uN J98u0] yeisns oq 10U flu saves ayy au Aq 2IQIssod epeut pareysuen axe sBuraes ouBuy Jo Koy aM asvorU] UeD soeL Isaz01Ut Wsodap UT SaseOIOU] ‘ys azyepoos 0} dyoy isnt wauTUs2A03 3UN y OWL *(eseet 2pea\) Awouos> 1) punojoud ‘aug uy 9for yer940 suounaA08 241 40} suO}eOI set maucusson fo 710% 24 “yo 100}}9 o}0eweIp e aAeY UED s10}95 UIDMIO SaTEI woo ut Jo 9182 jUNODsIp aut UF SaZUeY ‘apin8 on uowUz9A08 otf § swoog afueysxo 2018 2) oud pu “uaws2 1q Jo aouey> sart9q ® aaey SButAeS inguaudosqua saded ‘uoneynoads ‘s108sout 10} s903n0s91 210} 91Qe S| TUAUUIDAO8 aM ‘051 jo Word ay yBnosK nt ‘s90an0so4 Ut aseasout 10180} B 190}}9 UeD IsazaTUT Jo aves SOdap ot msy 190g wy uopozyoasnpuy Sinaayoy vet yews ang “Auyqour rey, wssod st uu) parse aw Puree areamnan wasnaaes This impetus then leads the government to provide a battery of ‘ways to reduce the risks of financi not only lender of ‘even government owne! rest rates and exchange these two dampen firms’ sportant sources of ‘company manage- take the long-term to diser le and irresponsible borrowing, and to penalize firms which borrow without due commercial cau- to trouble must not expect the government or the the moral hazard problem), ‘Once market signals are blunted by administered pr zed risk, the government must (the fourth impe: ce agency capable of supplement ignals as to which the government must ‘economy and exchange rate gains can precipitate accelerating movemeats in exchange rates, with damaging consequences for the real economy. Uncontrolled outflows make it difficult for government to arrange a sharing of the burden of adjustment to external shocks between the owners of capital and othe take the burden, with pi growth as the ‘These five imperatives are reflected in rea tures of the financial systems of all of our cour For example, the central guidance agencies well know! (MIT in Unrest, repression and interrupted identifiable fea- (Wade 1985a). each country are try of International Trade and Industry din the Republi of snd Developme ‘banks are 52). But Japanese ately owned, and have some autonomy with respect to of lending and response to ‘bad’ loans. Involve ment in company management is shared between bank creditors and government (¢.g. MITI). Banks in the Republic of Korea and and, are state owned (Korea’s until 1980+ less autonomy than Japan’s, ‘01 avo soye) pue ‘syzodxa si 01 stouseg dn and 0} ym BuppAue Burop 29 01 woVs 2 3s at fI250[2 MOY UO sOUOpIA9 Ou hop wey} B20Ur Ot JO froedeo Ayddns pue yeaZojouysar dn Suiprinq wits op oF A11901 “1p 210u 51 woswai JL, “QL6T 20uIs HeaK IsOUL sasmydins sjuswAed JO jeq uns sey (Pax0x Jo onfqnday aM axyun) wEANEY, uoWIOde r (KypuoUs skeae Kes: asop are ax2yy “Tuowafeuem ssautsng (ayeatsd) up ouazaps auatuusan08, ruasaidas 0} avaddo 10u op souay pue ‘01298 anjqnd ‘2 ug paureiuoa s,esseleq Uf “329 Jed gZI Jo spood sawns woo joxzeu! awoY Jo} uoNIa10xd aanoosso UE soIna[eD “URMUEL, “(ppL:z61) Buisq_ “2BesaKe ayy punose cover 1d Aaeay 219M JOIDes SuIMPe;MUEW am indo oun pue ueare 4109, a} aBesane apim-U0UOIo i wio4y WIep SasN BOI0H JO yeredusoo {tuo ayy, “vor e[o1 Sem uonoaiord uy) an “vetp s1sa83Ns 3 “S096T aujgnday ayy pure wea, 303 Kpmis et uauusonog fo 704 24, ena ppany 2 eto fa9989 UEIOL g -oud Jo apmyuSew aun uo 91qeHeae st 2oUDpIA9 Ont 203} © poor} ancy stiodxo 1erp uonysodosd ayp Agrfenb sna ‘spoo8 ue sodusy Kron autos 1odust o04} youu pur (SQL6T 39 40d zou 40 z JO t>1}0) spoo8 jedeo Kucus uo Kinp ded 01 savy sroyiodx9 1 oda se ann at ose axey Kau, “sseyoind Indu Uo s9x8) 1931p -uy wos} 1dwax9 “s9n9mol| ‘ait stotsodeg “uonranposd wodxa 10), ‘ae Katy J} uaa ‘sjonuoo azodust aaneaniuenb oF o0{qns srauiodxa ‘spo03 yy 29qpes 1OTEUL U8 pet ou aAeY| 20194 PLE ‘S001 nq pins Kaun faunas apes 9035 fe -oujnuEW! UF Wood s,uEMTE, 20) PoIssep>-oou ay up zsz21x0dx Jo uo! eroyyo ayy ueys [vas sso] usAq aaey eur “y1Mos8 pides juonbasqns nisy 50g 1 wo pysnpuy Suaaryay ul 144 Achieving Industrialization in East Asia that these industries can spread overheads over larger output and import con- thus lower their unit costs. Ata more aggregative lev trols have served the function of retaining economy more of the growth in demand from the export market, ing domestically based firms with a more expansive economic environment than if more of the additional demand gen- erated by exports leaked abroad in the form of imports. With a more expansive economic environment, domestic firms are more likely to keep their produ forward, and hence increase their international competitiveness at a later stage. Direct foreign investment controls the development consequences than if the firms are predominantly national Latin America and sub-Saharan Africa, mu - accounted for about 8 per cent of investment in manufactur in the Republic of Korea and Japan.) More important! hey have had restricted access to the domestic market. By one means ot another the governments have directed them towards exports (though export requirements are less the more the government echnology). lar interference with the international market has nal production ution. It means that government efforts to promote the growth and restructuring of dom: ity do not have to go through the multi 8 may not wholly coincide with the development of that can be invested according to specific rate the domestic market further, through hi over the firms that produce for the domes firms were predominantly multinational ‘operating on the domestic market tend to follow market eles that have litle to do with average incomes or traditional Ane Kove of wovernment ms . In the East Asian three, the ‘made available to consumers is a gradual and co geared to the population's purchasing power. Thus in the Republi of Korea, the most modern of consumer goods, manufactured ationals, were for along time restricted for export. ic purchasers, as basic needs in food and clothing have been off 1985). Other instruments eerage are also imp« (em where the governmé banks (as we have see). Japan and have made much use of market to foster the development of agglomerates (see fo public enterprise sector, unusually ified products. (The specifications incentives pressing agai duction frontiers.) Lil of research and des though their name ‘Research and Development’ organizations, for they are i to bé an industrial extension force as much as a research staff. In Japan the government has relied more on encouraging groups of private firms to form their own research and development cartels. ue ut “(6z61) stuey “ss200ns seme, Jo 1uNoDDe BuO] E U posoUs! Jo} jau|a YBnoUs ow ¥ U9Vq sey OBLIDNIS eI) st zaMsuE poytdust uo sty “Jou 30 woNsoNb ou soyeur oy uempey, uo soded prom Qgo'sT Ue UII2A “(68h:P6LET ySnom Te pus ‘So9gr ayn jo ued sone] 'u99q aAzy pinom 90ue uey, UEY) 240u! OU OF ‘ABoyens yetnsnp doad ayy jo-oau Jo asuodsa1 uounwuos y aunoure safotod ye10109s snoLEA ur snoxo8ia © pel oAzY 9x4) 01 sistwouioga quoudoyaaap [eo¥ AOALVMLS TVILISNGNI dO $193443 “squei8 ueadoang pur soreig pau amp aBuaqoys pinom yorum suzy 30 uy Sugroddns pue Sunensoyoio ut eanze ssoj AiSuspuodsouz 01 pey sey wawurano8 amp pue ‘sareig pautun au Jo asou yyaduioo wey femuetdtco ‘our soyotu Toxseus Bury20s “ood satno ut frjzedeo Ino vo1oy{ Jo nqnday oup pue uedes “A2q0d nouora ust2sof uy (A) -pye1 pou jqnday amp pue wedes jo stuawusan08 amp \ypea uy uonuaruy matssaA08 jo “ied ut puaunuaaog fo 204 24, s1o1098 areand poztesiuaa AryBiy asour axey Yoq Bax0H Jo qnd => 9th} pue uedes “s01298 atoayid ay fo uouwzqun80 ay) uy (Al) “aouasa}s91Ut anssai93e Jo 2suas ® 24819 uo 01 to 589] s10ja1040 St Yon pe “sioq995 oyeaud pus ongnd dup uzontog faepunog at) Susor9 aon 3 s30p on Sta fs -ssox8ie o1ow sioyreu Su ‘yoy9 aanensyuupe Jo ROWE at) MnYm ‘tueo 1u2unU2408 amp os pure “AwoUODd [euOHEUZaHUT ayY OF ‘pasodxa ssa1 st Auouose s.ueder new 19Ry a4 o9 anp aq Ket 3019105 “Hp yeMp Jo eg “uedes pue ueMTe, aamaq souaLayNp o1p uIeIdxa - 0} 94325 tou s20p woHEzapIstOD IsIY a) Os “YBIN osfe axe sBuT avs onsowop s,ueder “Awouore ayn Jo sseuado fo aa18ap uy (X) *(2ouazayzp amp Jo ouios dn ayeus 01 peosge Ajtsvay pamorsog sey Aavuno9 rey YBNOYy tard) ‘2ye17OpUN OF peY sey L910 YoIYA sioI—s ‘ayy mMOYTN ss0}B—5 UrELI2 AMOAEy 0} 21ge tua9q sey auouruz9A08 aup Os ‘s,eau0yf Jo ongnday axp ueys 1943Ty jwo0-uou 10} saqyfeuad axou ‘sony ~ainssoudasou ynd sey ouus9408 ayy at suas ao ueNeL Jo ve1p uous anyssou8de axou uo9q aaey eaz0y Jo aniqndoy atp pur uueder Jo saforiod texnsnpur aug, “satuooino yaxzeu ureLI99 InOGe SuBuLlg Jo 1oafqo amp yrNM ‘sioxeUI-uOIsIoap royzeUI Jo dons OU tuo siutesistoo 12s 01 ‘si9,.1eur ut ftjnpsomod auaALoIUY 0} sueoU oY ‘any suowrus9A08 dost y[e c3utod ay) anoge} oF paou ou st 9x21 ssousaysso188y “souanyur 1uawuz9008 0} yoafqns weeq aavy AZo}ou>> ,p>1poq ou Jou suoneziuedio quoudojaaap pue yoreasas sayy psy iso w uo passnpuy Buy 148 Achieving Industriaization in East Asia equally long account of Taiwan's industrial development, does Advisers, has no doubt that ‘Thereal explanation for the Japanese miracle is the country’ laissez-faire policies on taxes, » and labour. Japan teaches a lesson ... about y ofthe free market’ (198), cited in Johnson 1985:3), The idea that Japanese industrial polices actually hindered economic performance is caught in the assertion that ‘Without MITI Japan ‘would have grown at 15 per cent per nnuim’, instead of only 10 per cent (unnamed Japanese economist cuoted by Little 1979a:491). Saxonhouse (1983) and Trezise (1983) make more serious argu- ‘ments to the effect that selective industiial steerage has been a very ‘minor element in Japan’s success. ‘There is indeed a colossal identification problem. How can one tell that market liberalization (coupled with general infrastructural and educational investment) was the most important factor by far? id of evidence is needed to show that industrial strategy made a difference too important to ignore? ‘The question is complicated by the need to distinguish two levels, of industrial strategy — the generic level, on the one hand, including policies on the exchange rate, finance, taxation, and so on, which together establish the broad thrust of government policy towards -a-vis redistribution and consumption; and the sectoral level, on the other. The effect of sec- toral policies can be expected to depend partly on the net effect of these two levelsis clearly a major undertaki aside, how might one assess impact atthe sectoral level? ‘One might study a set of industries to examine the connect tween promotion measures and subsequent growth. In prac such an exercise would be fraught wi mation on the amount of assistance, even if measured on of fin ‘bursements or exemptions, would be diffi (much information on the use of concessional cre confidential, for example). Worse, promotional measures cannot be limited to financial disbursements or legal directives. In all three Ane Kole of wovernment a jot agencies lack large funds and firm sta is virtually impossible to connect straightfo manufacturing successes with financial help or clear directives. Many of the channels of transmission of influence are difficult to t alone quantify. For example, jera greater n would otherwise have might be used to explain why portant in indu ing other things constant sub-sectors. But beyond interpret the resuit ywly than those which dic ince measures, or does it indice that need assistance as a condi industry level, ther the country which in many im- of government has for example (Bol At best one can cegy has made a p and Pe 2q mou pinom uedeg ‘soynxa1 ut Ae oSewueape oanesed -uioo s,uedef rey) spunoi8 ayy uo soligoworne pue [9915 Yo UoNEN “uaou0a e paruaaasd pus ‘sps61-plus aun ut Cem suy 108 poy wedes 30 ‘yueg atp Jo Jouson08 oxy jt 1eup pane Ajsrows9s 9q f wa “euN!TOr ‘Aoyod yennau asou e poy pe Aaup 31 1OUedns u99q aaey pinom soureuilo}ied o1wouodd 1]es9A0 stay) YeYp Jo ‘,SuWeA-pueY, B10Ur 0} parunowe samp weIsy Isee] 2p JO saidorENS | -008 a4 Tem) uonysodozd aun 30} 120ddns jeousrduso uy ue -yo9[IBut 994} if Jo UOISION paztqeapy we suyeSe uorwoAZozUt 1u9WIUIO408 Jo 204 om -jeor amp sasodzatunoa suo ; nq Aynogup ay osfe ang zou oy) BuDyord, $uroey Axygrp axp Aquo row aziseydls oP 01 fouapua si oste 1nq ‘30x30ur popingun ou szisuidusa 03 jnyozeo 2q 01 OEY SIE ‘asaxp Supyeus wy {pomortos uonesedosd jepuassa ue se so ayeytur se paproa1 2q omqnday xp pue wewrey, jo wowdojanap au ur pouad roduut ayp st suorsonb @ Jo wos axp ur and 9q we SIMI, 2q souey we uonezteeqn oy) 212 2iaduloo eo siois2s 1weyodusy 9194) “tesoqut-uou, £q 34nosq u9aq Apeayje sey wouosa ay ‘yuo suoddey siqy yyy 99 eur 3 ‘ooueussojsad sywoUose ns kq pamojjo} uowo $1 wor “aneo Jo uonisanb ip ssoxppe osje Isnus B2u9pIAg-Fa1UNOD st], “oBbs0Ke mot ax waai® soueyodun sxou ayy 118 uo sae sou Jo 298) au, “Taquinw jews v 0} ondai0%d yy sazInbas soxsnpul Duos Jo vorroulosd antoajas amy asteaaq eis 1seq U4 YOM sy aBezone axp punoze uoysiodsip 2ew st 20u sey Tust sie [eotssefp-oot 04) YoIyAs “FOAaMOY “108j 1UerIOdUN puOD®S OY, somo] on s| uoriza}0xd Jo Yonsy adesoAe amp YIN asus 2 -qy, a1ow sy ad&y uersy ase ox 1eus # souNLZox apes noqe “produ sy amp ‘39470 9tp Uo eouNOWY UNE] pue eipuT puE ‘Pury, ‘uo otp wo ea1oy Jo oqnday amp pus UeMye UadMTaq ostIEdWOD ‘yp U smu, “aBezane alp punose vorsiadsip Jo sonss] out Ssazppe ‘sje ssn 9nq ‘paruayo ,pIEAUT, pre ,PIEMINO, B41] S9HLIOAL 9PM -fusowos2 01 paul] 9q roUUED UEpIA si, “Ao\UOpIAg-JaIuNOD aptosd sonjasuroyy sn oy 1A stamp Axonb 04 St “oau 10} yBnous 1oU st 1] nq ‘paBuayEYD 2q UPD sazpMIs 9S041 IY 1st muauussaog fe 10% 2b “sammy ueisy 1seq ou Jo ssooons yo somseour yita tm Ayaso *(oR6r teudisayy, pue eq wow pue presdeyy tssord tssand uy apegy °8'2) saseo spur parouro:d gJUL ULaLOY YO LOK qwanbasqns pue ur r9urzeSeyy ancy 9g “Uo! ‘uy soffuryp 01 asi 9408 wim ur moraeyag padueya 241 Moy puL ‘INO! Disy 190g wy uonozyoHAsnpuy Sursanyoy ost 152, Achieving Industrialization in East Asia because the obje ‘economic compet sufficiency. At the teay sup- Proposition that active and selective government tervention in a marke th outstanding then reply that the tervention simply ‘mimicked’ the market, helping to reach results an ‘ideal’ market would have produced. Whether the extraordinary a However, th ss well developed approach. emphasis on trs cal change as the central process of industrializa Hong Kong has had: clected industries. Thi Gofic te Uted Sts sd he Une glo ‘Kong asin Germany this poir tre Soeincs bans od The Role of Government change is made the centrepiece, an economi result of given endowments of capital, labour and natural re- sources, but is also the result of government promotion; because comparative advantage rests on accumulated capital and skills (technol ‘Westphal’ phrase: 1982) which can be enhanced by a long that some sectors and products are more important to the economy's future growth prospects than others. These sectors have maj the sense that the people affected by a di normal economic in three have acted as some sectors, which is required economic system encounters a source of instability arising from the ‘uncertainty inherent in the attempt to match supply decisions now with demand decisions at some time in the Profits are left to the vagaries of the market (the familiar product lines than branch into new indu ucts. An exogenous (nion-market) force is needed to favour such shifts, to lead economic agents from shorter- to longer-term invest- ment and marketing strategies, to channel profits from currently profitable activities into investment in those likely to become prof- itable in the future. In these same large-lump, long-gestation sectors, production economies of scale are likely to be important. Competitive advan- tage can be gained by firms if they are encouraged to develop @ large enough to capture the cost advantages. ies, to do wit ion of technologi *Seamnafqo uounguispos fq partaiouu399 sy jo Weauyp axp wo as0ur Sar and 2aey oF sw288 Wauluzan0D Ue cons wodxe paziseydwa ssou Uweasoy, 1p ‘sp10H s040 UT “2aUEUO}I0d siyosd woxy way 2) Aq padnoae: ays uana~asnssoid. sso so (2g 18244) woos Azan Buns0d ‘3S0up Jo sTuejut aun paBemnooUs fj 0 yusUMUIOROS 24 IN jodouow a10w pox! sa 0 anrandoy ou, “(oz6t Aa1peH) Cod! pezonpar 0) anna e9seUl poteos>-USWUION08 “uedes uy 39042 Bujonpur-quounsanuy ap Aq paduens oud yo fais Bonu Bryan et Su arse 4op -adusoo is uopparoud ajdnoo 01 1310s oney Ket], “ysoou ayo1aua8 03 suaqoufins rou som wondaroad 24aut BY) Pi (1 was sayanmoo aauy yo fo stosomnaing anuouc22 fosTU29 uusomiog aansojes 219m Kay (Q) «i ~rowosd ye pouite (Supyeads Ajerousd) oxo pues aout, ;stontuaAta -podus sot ug ney disepea| jo as91089 9 BYAA “sIUaMIUIaROT vamp otf Aq pastoroxo diystape: MSU UR J0 ,S1UDUOMIHO [219495 JO 9UO tO PasTd0J 2ARY | supuaus2a0g Jo 210% 942, centsuodsar frydiy sanb ou, “Buoqe Ating mnpord aatsuodsar & yaa, uononpord a1qeiyosd jo ndoy, waists uonanposd ayy opeu yeyM + ss2mod Autouoro oxp paqind *uraysKs ux ajdnos “sty, -wayp or todo s: ‘aues o8ny ® pey ueder pue wo0y, ‘uy soumaeynueur snoge| dey jo 21) Jo Buiuado ayn wy yoxrEUIOU, J neioadxa Jo siios atp sivajap ie ‘Q2861 ‘6261 epem “8'2) rou pinos Jono uous voy “Aoyod eUISNpUE Ue JO siys wotedde o19% under pur warox jo ongndayy ‘ueAIe, JO stusuiuz9.08 241 Kye pu moy Jo uonsanb ay of MoU auw09 2/4 NOLNGAWIINI Thassaz0NS 40 SNOLLIGNOD THI 241 Jo aouewo}10d snMOUODS soLedns au Bis yeas uo oye) 8 a4) Jo StIOys9 at npoxd pue 2oueape [eo1Fojoutjoa Jo saozn0s Jofets ‘8 solwouoss aaino-Buruzea] pue ‘9qe9s JO salutouoda ‘so;uIo “tooo [eusoyx2 yey sidoaoe ouo 31 ‘Suypesdn yons o1 soanuadut oxp ede jea!Zojouysay stom apesdn 01 sso9np pamides 1 2u0 kuB wos; spremyorg Jo 1wawdojanap ‘a1eutpi009 of SiuEwodun ‘are asayp e104 a[p98 Jo saqurouooa 1429 01 watoyyns afeas e uo fqo ayy, ‘stayddns sornuno sowop Futaordun ws Souay pue 4 x94) BuNe|MUINS Ul Box WerIOduHT Ue patejd AIquqoxd od 1uowuias08 ‘ueder pue va10x $0 onqndoy, “uemte, pod poppe anjea s24¥diy spremo) samionais sjwouods (sgor weur Sued ‘9861 1eudhsay4 pur y2eg tzg6t reudisaqa) ASojouyoar paonp Ont Atmou v s9A0 Asayseur bow suusy (31 pur) se jueuzodwi 29 ose Kew couple protection with comp ‘many other countries did n ‘outcome form in Ls domestic mar firms to export. . Large parts of the economy are more or less ignored in terms of government promotion. The discriminatory nature of state intervention is taken for granted as much as the opposite is taken for granted in the United States or in, where the declaration that an economic policy is discrimin- . Park and Westphal (1986) argue the sense of being intern: . The former face sr (or some of them) fa industry protection is. But in any case, selective and that the criteria of selection have something to do with future competitiveness, this serves to differentiate East Asian intervention from much of Latin American, Indian, and New Zea- land intervention, where the assumption has tended to be that con- ples were not transated into polices. Ihe Kole of Government ay in the sense that ions havea high degree of coherenc more. Again, however, the qu: promotional measures are, and the logic of the pattern of cumula- tion, is in great need of empirical research. ‘What are the organizational requirements for such a pattern of i jon to be realized? One is a credit-based financial system h government exercises influence over the allocation of sig ‘amounts of credit: it can support more rapid growth than would be possible in developing country conditions through a |-market system or one based on retained earni e government a powerft 1d influencing the balance because the other side of firms’ dependence on government an banks is the government's and the banks’ need for the firms to do ‘could be described as a ‘There needs 3s facing private agents can be intern ‘ean be made about how to encourage the transfer of re- ies to those which are (the same judgments as the management ge firm must make, but taking account of externalities, and promising for the f ofa between the Blue House, the Economic istry of Commerce and Industry, and the Mit nning and Development, the Industri ment Board, and the central bank. thas been argued by Johnson among others that a third organiz- Develop- snout “yueg puOA) wodey 1 ssusunos auoour

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