Bacaan 1

Japanese Journal of Political Science (2019), 1–21
doi:10.1017/S1468109919000197
RESEARCH ARTICLE
Towards a theory of the transformation of the

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developmental state: political elites, social actors and

state policy constraints in South Korea and Taiwan
Tian He
School of Government, Shanghai University of Political Science and Law Shanghai, P.R. China
Corresponding author. E-mail: hetiann@hotmail.com
(Received 11 September 2018; revised 20 March 2019; accepted 1 September 2019)
Abstract
The institutional changes to the developmental states in South Korea and Taiwan have been well-
documented. This paper offers a theory to recount the states’ actual transformation processes in these
two cases. Advancing existing insight that the state’s transformation process is shaped by the emergence
of either concentrated or dispersed economic interests, I argue that a crucial process behind the transform-
ation of the developmental state is a democratic transition of a country motivated by ruling elites’ strategic
choices. Specifically, a democratic transition in a developmental state is shaped by two consecutive elite
decisions: (1) the decision to initiate democratic transition in response to the democratic mobilisation
of the middle class; (2) the decision to introduce democratic elections in response to an electoral threat
from opposition elites. This process of democratic transition facilitates the emergence of state policy
constraints by transforming the political foundation of the state.
Key words: Democratic transition; the developmental state; ruling elites
The East Asian authoritarian developmental state, in which aggressive policy intervention is a key
feature, has been central to our understanding of successful industrialisation in several East Asian
economies. It is believed that these states, born out of East Asian ruling elites’ desire for political
survival, cannot last, as the effectiveness of the state in engineering rapid growth may inevitably be
undermined by the rise of social forces in the development process (Castells, 1992).1 Numerous studies
have supported this proposition by drawing on the examples of South Korea and Taiwan. For these
two newly industrialised economies, the state’s capability to direct economic development has been
undermined by the rise of various social actors (mainly large business owners and organised labour)
during the processes of economic liberalisation and democratic transformation.
The Korean developmental state had already exhibited signs of decline in the early 1980s as the
state became increasingly incapable of managing policy pressure from large businesses (Moon,
1994; Kim, 1997). A rapid decline of the developmental state occurred in the early 1990s when
both chaebol and organised labour became assertive over the state’s economic decision-making, a
change which many analysts held responsible for the country’s economic disaster in 1997 (Kim,
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1999; Minns, 2001; Clark and Jung, 2002; Heo and Tan, 2003). In the post-crisis period, despite a
temporary revival, the state could no longer operate on the principle of developmentalism as it had
done in the past (Kim, 2005; Cherry, 2006; Hundt, 2014). In Taiwan, the Taiwanese state largely
1
The authoritarian developmental state I refer to in this paper has four cases: South Korea, Taiwan, Singapore and post-
Mao China. It should be noted that It does not include the post-war Japanese developmental state which was not born out of
regime survival and was governed by a democratic government.
© Cambridge University Press 2019
2 Tian He
retained its dominant position vis-à-vis business elites and organised labour. Its superiority was
demonstrated in the country’s satisfactory economic performance during the Asian financial crisis
(Tan, 2001; Clark and Jung, 2002; Heo and Tan, 2003). A major transformation of the developmental
state occurred in the post-2000 period during which the state lost most of its capability to direct eco-
nomic development and could no longer insulate its economic policy-making from major societal
interests (Wu, 2007; Tan, 2008, 2009; Chu, 2011).
While these institutional changes have been well-documented, little attention has been paid to the
actual transformation process of the developmental state. One study by Heo and Tan (2003) has
explored the developmental state’s transformation process. They argue that East Asian ruling elites’
economic policy choices shape the industrial structure of a country, which in turn affects the
capabilities of business and labour actors to challenge the state’s economic decisions. In particular,
they identify two distinct types of industrial structure: concentrated industrial structure and dispersed
industrial structure. While a concentrated industrial structure shaped by the Korean military regime’s
policy preference led to the emergence of concentrated business and labour interests that were more
capable to challenge the state, the dispersed industrial structure shaped by the Taiwanese elites’ policy
preference gave rise to dispersed economic interests that produced limited political influence to
reshape the state in Taiwan.
This paper extends Heo and Tan (2003)’s efforts to understand the developmental state’s trans-
formation process. I argue that the emergence of either concentrated or dispersed economic interest
groups shaped by a country’s industrial structure constitutes only half the story of the state’s trans-
formation process. To offer a full explanation to the state’s transformation process, we need to under-
stand a specific political process – the democratic transition of a country2 as initiated by ruling elites.
This process includes two consecutive strategic choices made by East Asian ruling elites. The first elite
choice concerns political choices to end an authoritarian rule in response to the democratic mobilisa-
tion of the middle class (with or with the working class as an ally). The second elite choice concerns
the decision to introduce democratic elections in response to the emergence of an electoral threat from
opposition elites. A democratic transition of a country motivated by the strategic calculations of ruling
elites contributes to the transformation of the developmental state by altering the political foundation
of the state.
This understanding contributes to current studies on the transformation of the East Asian
developmental state. Most studies have focused on the emergence of business elites and organised
labour to explain the decline of the state in economic development. I will highlight the crucial role
played by another type of social actor – the middle class – in transforming the developmental state.
Compared to business elites and organised labour who directly challenge the state’s policy-making,
the middle class indirectly contributes to the transformation of the developmental state by forcing
East Asian ruling elites to democratise the political system of a country.
The paper is organised as follows. In the next section, I introduce a theory of the transformation of
the developmental state. Particularly, I elaborate my elite-choices hypotheses to explain the democratic
transition in a developmental state. Using case material from South Korea and Taiwan, I then test
these hypotheses to show how elite-led democratic transition is an important part of the developmen-
tal state’s transformation process.
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1. A theory of the transformation of the developmental state

1.1 The rise of the developmental state and the formation of the industrial structure of a country
It is argued that the rapid development process promoted by the state through aggressive government
policy intervention is a typical strategy of East Asian ruling elites to achieve performance-based legit-
imacy through a combination of political control and economic promotion (Castells, 1992; Doner
2
By ‘democratic transition’, I refer to the process of removing authoritarian rules and introducing democratic elections. It
does not include the concept of democratic consolidation.
Japanese Journal of Political Science 3
et al., 2005). The adoption of the survival strategy requires the ruling elites to build an authoritarian
system to impose political control and to create a core policy-making of the state to spearhead the
development process (Castells, 1992). The creation of the two types of political institutions ensures
the state’s autonomy in formulating growth-first policies; while a core policy-making agency ensures
the formulation of optimal policies, an authoritarian political system insulates the state’s economic
agendas from societal interests (Johnson, 1982, 1987; Amsden, 1989; Wade, 1990). In East Asia, the
autonomous state converts its strength and autonomy into coordinating capacity by entering a
state-led cooperative relationship with the private sector to ensure the effectiveness of the state’s policy
intervention (Evans, 1995; Weiss, 1995; Chibber, 2003).
The need for political legitimacy motivated East Asian ruling elites to construct institutional
arrangements for promoting economic growth; but how do they make their economic policy choices
within a state-led development? As I have noted, ruling elites’ creation of an institutional arrangement
for effective market intervention was a typical strategy to generate performance legitimacy and achieve
regime survival in the post-war period (Castells, 1992; Doner et al., 2005). Economic policies formu-
lated under this arrangement are thus consistent with ruling elites’ logic of achieving political survival
shaped by specific historical and domestic situations (Chu, 1999b; Tan, 2001; Heo and Tan, 2003).
An unintended consequence of the state’s industrial policies generated within the state’s institu-
tional arrangement is the formation of the industrial structure of a country. Through the allocation
of financial resources, state policies can shape the percentage of domestic private capital concentration
(DPCC) and state-owned enterprises (SOEs) in an economy (Fields, 1995).3 While the concentration
of financial resources on a small number of private firms leads to a high percentage of DPCC, the
restriction of the provision of financial resource to the private sector results in a low percentage of
DPCC coupled with a relatively high percentage of SOEs.
1.2 Economic growth, the rise of political interest groups and democratic transition
The developmental state, born out of the ruling elite’s strategy to generate performance-based legitim-
acy, cannot last forever. A major part of the transformation of the state is triggered by ruling elites’
decision to initiate democratic transition to transform their old legitimacy formula. I call this process
‘transforming the political foundation of the developmental state’. This process involves two major
elite decisions: (1) ruling elites’ decision to end an authoritarian rule; and (2) ruling elites’ willingness
to introduce democratic elections.
The source of the first elite decision is the emergence of democratisation pressure in the develop-
ment process. While Lipset (1959) argues that economic development associated with increases in
wealth, industrialisation, urbanisation and education cultivates a sizable urban middle class who are
more independent from state interference and generally more pro-democratic, Rueschemeyer et al.
(1992) argue that capitalist development can also give rise to a politically active working class by sup-
plying them with favourable conditions for organising labour movement.4 Clearly, a rapid develop-
ment process promoted by the state helps to create two pro-democratic social actors that are
willing to challenge an authoritarian government.5 But the question is, how will the middle and work-
ing classes push for the democratic transition? Studies argue that another type of political elite, oppos-
ition elites, can mobilise the two types of social classes to push for democratic transition. Collier (1999)
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3
A major principle of the developmental state is that it commits to the developmental of the private sector. Therefore,
SOEs can supplement private-sector enterprises but cannot replace them. Furthermore, there is a negative association
between DPCC and SOEs: The higher DPCC, the lower SOEs.
4
In this paper, the two social classes are identified by their socioeconomic interests. The middle class has a desire for
greater material benefits, while the working class are concerned about socioeconomic redistribution.
5
I do not assume that economic development can automatically shift the balance of power between an authoritarian state
and society. When a state can still retain control over a society, neither social classes are willing to challenge the state. This is
illustrated by the Singaporean case in which neither the middle class nor the working class have shown their enthusiasm for a
democratic transition.
4 Tian He
notes that liberal opposition elites can mobilise the middle class to push for democratic transition, as
the establishment of a liberal democratic political system can allow their class inclusion. The work of
Luebbert (1991) shows that, attracted by the idea of liberalism, both the middle class and the working
class can be mobilised by liberal opposition elites to collectively push for democratic transition to
achieve their respective class inclusion.

With these insights in mind, we can now explain the emergence of democratisation pressure in devel-
opmental Asia. The emergence of pro-democratic middle and working classes provides East Asian
opposition elites with an opportunity to challenge old authoritarian regimes. Adopting a liberal demo-
cratic agenda, they can successfully mobilise the two social classes to push for a democratic transition.
Given the above discussion, we can conclude that a state-led development can lead to the democratic
mobilisation of the middle class with or without the working class as an ally. There are two possibilities
for this outcome. First, when both the middle class and the working class are mobilised, a cross-class
alliance can be formed against an authoritarian state. Second, when the mobilisation of the working
class is hindered by structural factors which cause the dispersion of domestic labour forces (as we
will see in the case of Taiwan), only the middle class is mobilised to push for democratic transition.
To explain why ruling elites initiate the democratic transition, we need to understand their specific
strategic calculation in response to the democratisation pressure emerging from a state-led develop-
ment. According to Olson (1993), authoritarian rulers would allow democratic transition when
they can no longer retain political control in a country. To Olson, initiating democratic transition
can allow authoritarian rulers to prolong their political presence through power sharing. For East
Asian ruling elites, the democratic mobilisation of the sizeable and political significant middle class
for democratic transition (with or without the working class as an ally) creates a situation in which
they can no longer retain political dominance. Their old legitimacy formula that is based on political
control and economic promotion clearly can no longer function to ensure political survival. Therefore,
ruling elites’ decision to initiate a democratic transition to end the authoritarian rule becomes a stra-
tegic choice for them to form a new legitimacy formula that is based on the principles of democracy.
After imitating a transition to a democratic political system, old East Asian authoritarian rulers can at
least remain in the politics of a country to continue to compete for political power in a democratic
context. Based on this discussion, I hypothesise that:
H1: A democratisation movement pushed by the middle class (with or without the working class as
an ally) can force ruling elites to initiate the democratic transition.
I now turn to the process of democratic transition following the ruling elites’ decision to transform
their legitimacy formula in response to the democratic mobilisation of the middle class. A major com-
ponent of democratic transition is the formation of agreements among political elites (O’Donnell et al.,
1986; Huntington, 1991). Thus, ruling elites’ willingness to reach agreements with opposition elites
matters in a democratic transition process. Boix (1999) argues that a key factor, electoral threat,
plays an important role in incentivising a dominant ruling party to introduce democratic electoral
rules. He argues that the introduction of democratic rules would allow ruling elites to ensure max-
imum political representation in the new electoral arena. The level of an electoral threat, according
to Boix, is a function of two main conditions: the strength of the new parties and the capacity of
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the old ruling parties to coordinate among themselves to block the growth of new parties.
Boix’s work offers historical guidance to explain the pace of democratic transition in developmental
Asia. During the elite-negotiation process, East Asian ruling elites are likely to face a certain degree of
electoral threat from opposition elites. This is due to two reasons: First, emerging as credible political
parties in an authoritarian period, new opposition parties that are generally more liberal and progres-
sive are capable of mobilising pro-democratic middle-class voters. Second, in the past, authoritarian
institutions ensured the political dominance of the ruling elite. With the decision to end an authori-
tarian rule, the ruling elites certainly do not possess any effective tools to contain the growth of oppos-
ition parties. East Asian dominant parties are highly adaptable to new political situations associated
with their electoral decline (Friedman and Wong, 2008). It is therefore highly desirable for Asian rul-
ing elites to adopt some forms of adaptions in response to the possibility of losing elections.
Competitive democratic elections as a form of most basic democratic electoral rules would allow
Asian ruling elites to ensure their maximum political representation in the democratic politics of a
country. This discussion leads to my third hypothesis:
H2: During a democratic transition, the higher an electoral threat posed by opposition parties, the
greater willingness for ruling elites to introduce democratic elections.
1.3 Trade-driven growth, industrial structure and the emergence of economic interest groups
A concurrent political process behind the transformation of the developmental state is the emergence
of business and labour interests. In developmental Asia, the growth of business and labour interests is
an inevitable consequence of the export-oriented industrialisation engineered by the state. With the
export expansion, both businesses and labourers become assertive over the state’s economic decisions
to defend their economic interests (Rogowski, 1989). The rise of business and labour interests are cap-
able of shaping the state’s policy-making. While the capability of business elites to shape the state’s
economic decision-making comes from the importance of businesses to the economic performance
of a country, the power of organised labour to shape state policies lies in the industrial actions of orga-
nised labour which can disrupt any economic performance of the state (Gourevitch, 1986).
The industrial structure of the country can shape the capabilities of economic interest groups to influ-
ence the state’s economic policy-making. According to studies, the higher the degree of DPCC, the
greater the capabilities of business elites and organised labour to challenge the state’s economic
decisions. The logic to explain this correlation works as follows. The concentration of domestic private
capital facilitates the emergence of concentrated business and labour interest groups. Concentrated busi-
ness interest groups are giant business actors who have greater power to influence the state because of
their importance to a country’s economy. Concentrated labour interest groups consist of large labour
unions. Given their great mobilisation strength to launch industrial actions resulting from the concen-
tration of industrial workers, concentrated labour interest groups also have a large bargaining power to
influence the state’s policy direction. In contrast, an industrial structure characterised by a low percent-
age of DPCC and a high percentage of SOEs creates the condition for the emergence of dispersed eco-
nomic interest groups. Dispersed business interest groups predominantly consist of small business
entities and a number of relatively large business groups who clearly lack the capability to demand
state policy changes. Dispersed labour interest groups have limited strength to influence the economic
decision-making of the state due to their limited mobilisation strength resulting from the dispersion of
industrial workers in the private sector (Horowitz and Heo, 2001; Tan, 2001, 2008, 2009).
1.4 The emergence of state policy constraints and the transformation of the developmental state
My above theoretical discussion involves two sets of actors: political elites and social actors. Political
elites include ruling elites and opposition elites. Ruling elites seek to achieve political monopoly
through a combination of political control and economic promotion. Opposition elites can challenge
the power monopoly of ruling elites by mobilising a democratisation movement. Social actors include
https://doi.org/10.1017/S1468109919000197
economic and political interest groups. Business elites and organised labour are economic interest
groups whose capabilities to influence the state’s policies are shaped by the industrial structure of a
country. The middle class and the working class are political interest groups who have desires for
pushing the political system of a country towards a democratic direction to achieve their respective
class interests: the middle class are concerned about protecting their socioeconomic benefits, while
the working class are concerned about economic redistribution.
The political actions of these actors led to two political processes: (1) the emergence of economic
interest groups affected by the industrial structure of a country; (2) a democratic transition initiated by
6 Tian He
ruling elites in response to the democratic mobilisation of the middle class. Figure 1 illustrates my
argument. These two political processes can lead to the transformation of the developmental state
by producing two types of state policy constraints: (1) structural constrains from business elites and
organised labour; (2) institutional constraints from the middle class and business elites (see Fig. 2).
Institutional constraints emerge as the democratic transition process initiated by ruling elites
changes the context in which the state’s policy-making occurs. In a democratic context, the power con-
solidation of the ruling elites requires the support of the two types of social actors: the middle class
who offer political support (often in the form of voting) and business elites who offer political fund-
ing. The reliance of the ruling elites on business elites for political funding undermines state-led state-
business cooperation (Lim, 2009). The need of ruling elites to achieve electoral legitimacy also diverts
the state from its growth-first economic visions.
The emergence of structural constraints occurs when the interests of business elites and organised
labour can shape the state’s decision-making. Given that the state’s policy-making is insulated by the
authoritarian political system in a developmental-state context, the democratic transition can facilitate
the entry of business and labour interests into the state’s decision-making process. Democratic tran-
sition not only intensifies business interests for lobbying, but also empowers the role of business inter-
ests in the state’s more open decision-making (Kim, 1993; Tan, 2008). The end of authoritarian rule
also allows industrial workers to defend their economic interests through organisation of independent
labour unions.
2. The rise of the developmental states, industrial structure, economic interests

2.1 How elites’ economic policy shaped the industrial structure of the countries
In the post-war period, we saw the rise of the two developmental states in South Korea and Taiwan. In
South Korea, the need for regime survival emerged after a military coup led by Park Chung-hee in
1961. In Taiwan, a similar kind of regime survival commenced after the Kuomintang (KMT)’s reloca-
tion to Taiwan. In both countries, we witnessed the ruling elites’ adoption of a survival strategy based
on a combination of political control and economic promotion. In Taiwan, the KMT’s political control
began with a party reform which led to the creation of an authoritarian structure in the early 1950s
(Gold, 1986; Chu, 1994; Dickson, 1997; Myers and Lin, 2007). In South Korea, the initial mechanism
for political control was created with the Korean Central Intelligence Agency (KCIA) as its core in the
1960s and was upgraded in the early 1970s with the ratification of the Yushin Constitution (Clifford,
1994; Oh, 1999; Heo and Roehrig, 2010; Han, 2011; Kim, 2011). To promote economic growth, the
state’s economic policy-making were put into place in both countries. In South Korea, the
Economic Planning Board (EPB) was established by the coup leaders in 1961 to direct industrialisation
(Johnson, 1987; Woo, 1991; Oh, 1999). In Taiwan, a series of state policy-making agencies were cre-
ated to direct Taiwan’s economic development at different stages (Gold, 1986; Wade, 1990; Cheng
et al., 1998; Wu, 2005).6
When launching their respective economic transformation projects, the two states emerged out of
regime survival as the ruling elites pursued entirely different economic policy preferences: promotion
of DPCC in South Korea and prevention of DPCC in Taiwan. In the following paragraphs, I will
demonstrate how ruling elites’ need for political survival played important roles in shaping the states’
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policy choices during two very crucial economic processes in South Korea and Taiwan: the two
countries’ initial push for labour-intensive export promotion and their industrial upgrading at a
later stage of economic development.
Ruling elites’ policy preferences diverged in the beginning of the two countries’ industrialisation
period. In South Korea, the elites’ preference for promoting private capital concentration was shaped
6
They include the Taiwan Production Board (TPB), the Economic Stabilisation Board (ESB), the Council for United State
Aid (CUSA), the Council for International Economic Cooperation and Development (CIECD) and the Council for Economic
Planning and Development (CEPD).
Figure 1. The transformation of the develop-

mental state.
Figure 2. Economic Interests, Democratic Transition and State Policy Constraints.
by the regime’s decision to promote chaebol. To quickly kick off the development process in the early
1960s, the promotion of chaebol proved an inevitable policy choice of the military regime; the chaebol,
created in the Japanese colonial period, was in possession of most essential economic resources includ-
ing economic expertise, personnel and facilities (Kim, 1976, 1988; Fields, 1995; Kim and Park, 2011).
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In Taiwan, the émigré nature of the KMT regime shaped the state’s preference in two sets of state pol-
icies in 1950. The first was a massive land and reform and the second was the state’s promotion of
SOEs. Both sets of state policies facilitated the political survival of the émigré regime; while the former
aimed at boosting the popularity of the regime among the Taiwanese and eliminating all large indi-
genous businesses that could potentially challenge the KMT (Gold, 1986; Ho, 1987; Dickson, 1993;
Wong, 2003), the latter aimed to provide employment for their mainland support base (Fields,
1995, 2002; Minns, 2006: 206).
Specific political objectives of the ruling elites to achieve regime survival continued to shape the two
states’ policy choices in the 1970s, as both countries embarked on industrial upgrading processes. In
8 Tian He
South Korea, the promotion of chaebol became even more irreversible in the new stage of economic
growth for the apparent reason that only chaebol could facilitate the state’s ambition to embark on a
heavy-chemical industry (HCI) drive, which was crucial for the regime to generate badly-needed per-
formance legitimacy (Jung, 1988; Kim, 1988; Fields, 1995; Kim and Park, 2011). In Taiwan, the émigré
regime’s political goal was similarly not compromised in the 1970s. During this period, the political
survival of the KMT became closely linked with a sector that had been neglected by the state in the
1950s and 1960s – the SME sector.7 An SME strategy could not only drive economic growth, but it
could also help the KMT generate political support among SME owners who were mainly native
Taiwanese (Wu, 2005). Consequently, while strengthening SOEs in heavy industries, the state
launched a ‘joint project’ with the SMEs to promote high-tech industries (Gold, 1986; Clark, 1989).
In sum, the state’s policy choice in the development process is closely linked with ruling elites’ spe-
cific logic of political survival in the post-war period. In South Korea, the military regime’s reliance on
the country’s major economic players, the chaebol, to generate economic growth made the state’s
preference for large businesses inevitable in the 1960s and the 1970s. In Taiwan, the KMT’s need
to generate popularity as an émigré regime pushed the Taiwanese state to adopt an entirely different
developmental strategy. This was seen in the state’s two policies (the land reform and SOE creation) in
the 1950s and the state’s projects to cultivate SMEs while promoting SOEs in the 1970s.
The state’s initial push for export-led growth in the 1960s and industrial upgrading in 1970s shaped
the industrial structure of the two countries. In South Korea, a concentrated industrial structure
emerged by the end of the 1970s. In 1980, the top 50 chaebols contributed 49% of Korea’s gross
domestic product (GDP), more than half of Korea’s total exports, and 18% of employment in the
manufacturing sector (Haggard and Moon, 1990: 218). In contrast, a dispersed industrial structure
had formed in Taiwan by the early 1980s. In the early 1980s, SMEs, the majority (nearly 98%) of
Taiwanese enterprises, produced 65% of Taiwan’s manufactured exports (Chou, 1992). The private
business groups only represented just over 10% of the total GNP (Fields, 1995: 7).
2.2 The emergence of economic interests

An important process driving the transformation of the developmental state is the emergence of busi-
ness and labour interests. In South Korea, the highly concentrated industrial structure gave rise to con-
centrated business and labour interests. In Taiwan, the industrial structure initially led to the
emergence of dispersed business and labour interest groups, although privatisation would later lead
to the emergence of more concentrated business interest groups and further marginalise labour inter-
ests in the private sector.
2.2.1 Concentrated and dispersed business interest groups

In South Korea, with a high percentage of DPCC, the state-led development process gave rise to con-
centrated business interest groups – the chaebol owners. Given their weight in the economy, the chae-
bol owners’ strong capability to shape the state’s policies was already demonstrated before the
country’s democratic transition. The Chun Doo-hwan regime’s policy to reduce the concentration
of the chaebols was unsuccessful because of the chaebol’s open defiance of the state through the acqui-
sition of new firms. Furthermore, the chaebol even reversed the government’s specific industrial policy
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to promote Daewoo during the reorganisation of the HCI. The chaebol also successfully achieved
financial independence during the process of financial reform (Kim, 1993, 1997; Moon, 1994; Zeile,
1996; Lee et al., 2002).
Korean business interests remained highly concentrated in democratic Korea. In 2017, sales rev-
enue earned by the top 10 chaebols accounted for 67.8% of the country’s GDP; their assets equalled
nearly 110% of GDP, with Samsung’s assets alone accounting for 42% (Premack, 2017:4). The
7
By then, the SMEs had become the major driver of the economy. The land reform actually provided a basis for the devel-
opment of a viable SME sector in Taiwan (Wong, 2003).
chaebol’s significant bargaining power was indisputable in the 2010s, when scholars raised the ques-
tion of ‘whether top chaebol leaders are too big to indict, regardless of their behaviour’ (Haggard and
Rhee, 2017).8
In Taiwan, the country’s low percentage of DPCC in the 1990s gave rise to dispersed business inter-
est groups that lacked the capability to challenge the state. The majority of Taiwanese business actors,
mainly SME owners, moved their business abroad and became even more distant from the state policy
process given their limited political influence to obtain favourable policies in an increasingly demo-
cratic Taiwan (Chu, 1994; Lam and Clark, 1994; McBeath, 1998; Clark and Tan, 2012). Within the
Taiwanese economy, there were no business elites that could be considered as important as their coun-
terparts in Korea. Their inability to contribute to state policy-making had already been evident in the
1980s, during which Taiwanese business elites had to rely on powerful SOEs to influence the state’s
economic agendas (Wang, 1996; Wu, 2005).
While the high level of DPCC remained unchanged in South Korea, the initial Taiwanese industrial
structure shaped by the state’s policies was transformed in the 2000s. A number of financial conglom-
erates, controlled by family-owned business groups, formed during the privatisation of state-controlled
financial institutions (Clark and Tan, 2010; Wang, 2012). As a result of the emergence of these power-
ful financial conglomerates, a level of private capital concentration that was comparable to that of
South Korea’s chaebol had appeared in Taiwan by the late 2000s: the financial assets owned by the
most prominent three family-owned business groups accounted for 65% of Taiwan’s GDP (Tao
and Chang, 2008: 231).
2.2.2 Concentrated and dispersed labour interest groups

In South Korea, the concentrated industrial structure resulted in concentrated labour interests and the
emergence of a few strong chaebol-based labour unions. Following the country’s democratic transition
in 1987, the emergence of chaebol unions fundamentally transformed labour relations (Koo, 1993,
2001; Chang, 2009). These unions remained highly organised during Korea’s structural reform in
the post-crisis period. With powerful mobilisation resulting from their large membership base, orga-
nised chaebol workers successfully secured their job security and became ‘labour aristocrats’ in the
process of neoliberal reform (Kim, 2013).9
In sharp contrast with the Korean case, private-sector labour interests are largely disorganised in
Taiwan. The initial industrial structure, characterised by a low percentage of DPCC and a high per-
centage of SOEs, produced dispersed labour interest groups in the private sector. Given the dispersion
of SME workers, Taiwanese labour activists faced enormous obstacles to organise labour unions in the
private sector following the country’s transition to democracy (Yu, 1993; Minns and Tierney, 2003;
Ho, 2006a). Taiwanese organised labour was dominated by SOE-sector labour unions that became
increasingly organised in response to the threat from the country’s privatisation process initiated in
the late 1980s (Chiu, 2011; Ho, 2012). Consequently, private-sector labour interests were further mar-
ginalised as SOE interests dominated the policy agenda of organised labour (Ho, 2008).10
3. The transformation of the political foundation of the state

While the developmental state is affected by the emergence of economic interest groups which affect
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the state’s economic policy-making, the state also changes as a result of the transformation of its pol-
itical foundation. My hypotheses suggest that the transformation of the political system of a country
involves two decisions by the ruling elites: (1) the decision to end authoritarian rule in response to the
8
Many of the chaebol leaders who were convicted for wrongdoings were spared prison terms either by judges who recog-
nised their significance to the national economy or by the ruling elite who sought to lift national spirits.
9
One of the most extraordinary gains for chaebol workers was job security to the extent of securing what can be described
as priority employment opportunities for the children of retiring workers with more than 25 years of service (Kim, 2013).
10
The domination of the SOE unions explains why the labour interests in the private sector remained largely unorganised
despite the rise of large firms such as Hon Hai/Foxconn Technology Group.
10 Tian He
Figure 3. Ruling elites’ democratisation decisions in South Korea and Taiwan.
democratic mobilisation of the middle class; and (2) the willingness to introduce democratic elections
in accordance with the level of electoral threat from opposition elites.
In this section, I will assess my elite choice hypotheses, using empirical cases from South Korea and
Taiwan. Figure 3 provides a summary of these strategic choices made by ruling elites in South Korea
and Taiwan.
3.1 Rival explanations

This section first considers the rival explanations for ruling elites’ decision to democratise the political
system of a country. It is often argued that external geopolitical factors such as pressure from the 1988
Olympics and public pressure from the US government forced South Korea ruling elites to carry out
democratic reform (see Fowler, 1999). Domestic social cleavage (i.e., regional cleavages) is also believed
to have contributed to the ruling elites’ strategic decision to democratise the political system of the
country in South Korea (Kwon, 2004).
The internal variation within South Korea eliminates social cleavage as a variable to account for
elites’ decision to initiate the democratic transition. Regionalism was a constant factor in South
Korea, yet ruling elites made divergent choices in 1980 and 1987. An argument can also be made
that a divergence in external factors such as pressure from 1988 Olympics and public pressure
from the US government between 1980 and 1987 resulted in divergent strategic choices in South
Korea. However, the case of China, the largest developmental state in Asia, indicates that external
geopolitical factors do not necessarily correlate with East Asian elites’ decision to initiate democratic
transition. In the next section, through empirical analysis, I will show that the democratic mobilisation
of the middle class is the variable that determines elites’ decision to end authoritarian rule.
Alternative explanations for elites’ decision to introduce democratic elections include both external
and internal factors. These explanations seem effective in explaining the variation in ruling elites’ deci-
https://doi.org/10.1017/S1468109919000197
sion to introduce democratic elections between South Korea and Taiwan. Specifically, it seems possible
that the US military presence in South Korea put the Korean ruling elites under greater pressure to
introduce democratic elections.11 It could also be argued that the scheduled 1988 Olympics produced
more constraints for Korean ruling elites to delay the introduction of democratic elections.
Furthermore, the variation can also be explained by domestic regional cleavages which incentivised
11
US military withdrew from Taiwan after Sino-US rapprochement in the 1970s and the downgrade of bilateral ties
between Taiwan and USA.
the Korean ruling elites to push forward with the country’s democratisation process. The main prob-
lem with these alternative factors is that none of them can explain Taiwan’s internal variation. In the
following section, I will demonstrate how Taiwanese ruling elites’ interest to introduce democratic
elections corresponds with the levels of electoral threats facing ruling elites.
3.2 Elite decision 1: ending an authoritarian rule

Three historical episodes will test my first hypothesis concerning ruling elites’ decision to end authori-
tarian rules. The case of South Korea in 1980 represents a negative case in which ruling elites had no
intention to initiate a democratic transition in the absence of the democratic mobilisation of the middle
class. The cases of South Korea in 1987 and Taiwan in 1986 will serve to confirm the plausibility of my
contention that the democratic mobilisation of the middle class forces ruling elites to transform their
legitimacy formula through initiating democratic transition with or without the working class as an ally.
3.2.1 Reproduction of a dictatorship in South Korea

With rapid development engineered by the state, the emergence of a democratisation pressure chal-
lenged the authoritarian rulers in South Korea in 1980. In South Korea, opposition elites’ attempt
to link the country’s democratic transition to the issue of economic injustice led to a national
democratisation movement – the Minjung Movement (Choi, 1993; Koo, 1993). However, the power
consolidation of ruling elites subsequently followed the old method of imposing political control.
To explain the Korean rulers’ lack of interest in initiating a democratic transition, we must explore
the absence of the middle class from the democratisation movement.
The support of the middle class could not be obtained in the late 1970s due to division within the
opposition community. Ideological differences and historical factors (regional politics) intensified by
the death of Park in 1979 were behind the elite division, particularly between the two major leaders –
Kim Young-sam and Kim Dae-jung (Cotton, 1989; Nam, 1989). Without a strong liberal community,
the working class adopted a radical approach to pursue their own class agenda. Sohn (1989) notes that
the establishment of a radical interpretation of social phenomena especially among the
students-turned workers occurred in October 1979 when a massive uprising broke out in Pusan
and Masan. The radicalisation of the working class consequently deterred the desire of the middle
class for a regime transition. Han and Chung (1993: 206) write on the hesitation of the middle
class following the radicalisation of the labour,
‘Even though riots broke out in certain cities such as Kwangju when martial law was extended
throughout the nation in May 1980, citizens began to show as much concern about the social
instability and disorder accompanying the democratisation process as about its delay. Such con-
cern became more poignant as student demonstrations intensified and after large-scale riots by
miners and steel mill workers broke out in April’.
Without the participation of the middle class, the strategic response of the de facto authoritarian ruler
of South Korea in 1980, General Chun Doo Hwan, to a democratisation movement followed the old
methods of authoritarian repression. His repressive measures included the arrest of student leaders
https://doi.org/10.1017/S1468109919000197
and opposition leaders, the imposition of full martial law, and the issuance of new Martial Law
Decree No. 10 which led to an instant restriction on all political activities by closing universities, ban-
ning all political gatherings and imposing prior censorship over all publications and broadcasts (Lee,
1981; Nam, 1989). Army paratroopers trained for combat against North Korean troops were deployed
in the southern city of Kwangju, where his repression strategy was challenged. Chun’s repression strat-
egy was apparently sufficient to deal with the situation in 1980; within a half month, social and pol-
itical order was restored in South Korea.
The case of South Korea in 1980 has clearly indicated that a democratisation movement pushed by
the working class without the participation of the middle class could not motivate the ruling elites to
12 Tian He
transform the legitimacy formula through a democratic transition. In the next few paragraphs, I will
turn to the cases of South Korea in 1987 and Taiwan in 1986 to show that when the middle class offers
their support for democratisation movement, democratic transition becomes a strategic choice of rul-
ing elites to transform their old legitimacy formula.
3.2.2 The end of South Korea and Taiwan’s authoritarian periods

As I noted before, in South Korea, a cross-class alliance could not be formed in the 1970s due to a divided
liberal community. This was no longer the case in South Korea by the mid-1980s when both two major
opposition elites, Kim Young-Sam and Kim Dae-Jung, announced their abandonment of personal ambi-
tions to collectively challenge the power monopoly of the ruling elite (see Lee, 1990: 25). In the subsequent
‘6.10 struggle’ which lasted for 20 days, the formation of a cross-class alliance greatly challenged the
authoritarian regime, as millions of citizens came forward all over the country to demand the country’s
transition to democracy (Han, 1988; Nam, 1989: 308–309; Oh, 1999: 91–93). The positive effect of the
democratic mobilisation of the middle class on the strategic calculations of the Korean rulers to transform
their legitimacy formula was consequently witnessed in June 1987, when Chun Doo-hwan’s chosen suc-
cessor, Roh Tae-woo, refrained from using political repression and pursued a strategy of democratic tran-
sition, announcing his democratic declaration in June 1987.
The Taiwanese case identifies an even stronger and consistent linkage between the middle class
mobilisation and elites’ decision to initiate a democratic transition. Unlike the Korean case,
Taiwan’s rapid socioeconomic development engineered by the state did not lead to the rise of the
working class. The absence of the working class as a potential democratic partner was largely due
to the country’s decentralised economic development that had deterred the growth of a working
class consciousness (Yu, 1993; Chu, 1996; Minns and Tierrney, 2003). Mobilised by liberal elites on
the issue of national identity, the democratic mobilisation of the middle class spurred a national dem-
ocratisation movement – the Tangwai movement (Tien, 1989; Rigger, 1996, 1999; Hsiao and Koo,
1997; Myers and Chao, 1998).
With consistent pressure from the middle class, the ruling elite began to contemplate the formation
of a new legitimacy formula much earlier in Taiwan. The first sign of the elites’ adaption came as early
as 1983 when the KMT leader Chiang Ching-kuo assembled a team to put together a blueprint and
strategy for democratic reform (Myers and Chao, 1998). The Taiwanese ruling elites’ decision to end
an authoritarian rule eventually occurred after the formation of an opposition party – the Democratic
Progressive Party (DPP) in 1986. The formation of the DPP in defiance of the martial law clearly sig-
nified that the Tangwai movement reached a new level (Myers and Chao, 1998). The intensified demo-
cratic mobilisation of the middle class made the elites’ decision to transform legitimacy formula as an
inevitable choice in 1986. The necessity for the KMT’s decision was pointed out by Dickson (1997:
213) who writes, ‘The KMT would be better off allowing an organised opposition to participate within
the political arena than risking continued chaos outside it’. To transform their legitimacy formula, the
KMT leader refrained from resorting to political repression and announced major political liberalisa-
tion measures, including the acceptance of the DPP and the lifting of martial law restrictions (Tien,
1989; Chu, 1992; Myers and Chao, 1998).
In short, the democratic mobilisation of the middle class plays an important role in shaping the
ruling elites’ strategic calculation to transform their legitimacy formula in South Korea and Taiwan.
https://doi.org/10.1017/S1468109919000197
These two strategic elite decisions consequently kicked off the transformation of the political systems
of the two countries towards a democratic direction.
3.3 Elite decision 2: elites’ willingness to introduce democratic elections

This section covers the core component of a democratic transition – the introduction of democratic
elections. This process involves the negotiations between ruling elites and opposition elites. My
hypothesis attributes the ruling elites’ willingness to introduce democratic elections to the level of
electoral threat from opposition elites. South Korea and Taiwan are two distinctive cases to illustrate
this contention.
3.3.1 South Korea’s speedy introduction of the democratic election

In South Korea, a full democratic presidential election was held in the same year that Roh made his
democratic declaration. Democratic election to the other branch of the government, the National
Assembly election, was held in early 1988. Electoral threat proves helpful in explaining South
Korea’s speedy democratic transition.
In South Korea, the ruling elites faced a strong electoral threat in the 1980s. In 1985, the February
National Assembly election showed an impressive voter support of 29.26% for the opposition New
Democratic Party of Korea (NKDP) while the DJP’s share of the popular vote declined from 35.6%
in 1981 to 35.3% and it lost the three seats it had won in 1981 (Nam, 1989: 301). Lee (1990: 21)
notes that a 1985 secret survey conducted by the pro-government Kyunghyang Daily suggested that
nearly 53% of the respondents did not support the Chun regime. The electoral threat heightened in
March 1987 when an even stronger and unified opposition party emerged as the two Kims broke
away from the NKDP and formed the hard-line opposition party, the Reunification Democratic
Party (RDP), taking with them 66 of the 90 NKDP lawmakers.
With such a level of electoral threat, the Korean authoritarian rulers had no reason to delay the
introduction of democratic elections. Facilitating a speedy transition was an optimal choice for the rul-
ing elites – implementing full democratic elections for both the state’s decision-making bodies would
allow the ruling party to hold maximum power in the event of an electoral setback. This choice
became even more attractive when they realised that allowing full democratic elections would bring
another benefit – enhancing the possibility for the rulers to defeat their democratic opponents by
renewing conflicts between two major opposition leaders (Saxer, 2003; Heo and Roehrig, 2010).
Consequently, we witnessed the ruling elites’ great willingness to push forward a thorough constitu-
tional reform process to transform the political system of the country towards a democratic transition
after the June declaration. A special commission was formed in the National Assembly. By October, the
National Assembly had adopted sweeping revisions to the constitution. All democratic institutional
changes to transform the authoritarian system were finalised in the 1987 amendments. These changes
to South Korea’s political system include the removal of authoritarian institutions that restricted various
civil and political rights including freedom of the press, campus autonomy, the banning of arrests with-
out a warrant and the lifting of restraints on artistic creativity. The removal of authoritarian institutions
was accompanied by the installation of democratic electoral institutions including the first direct presi-
dential election and the National Assembly election (Henderson, 1988; Bedeski, 1994; Oh, 1999).
3.3.2 Taiwan’s slow introduction of democratic elections

In contrast with the South Korean case, the removal of authoritarian institutions was not accompanied
by the introduction of both legislative and executive elections in Taiwan. Democratic elections for the
National Assembly election was not held until 1991 and the Legislative Yuan until 1992, and the presi-
dency until 1996.
The factor that proves most helpful in explaining the Taiwanese ruling elites’ lack of incentive to
introduce democratic elections in 1986 is the low level of an electoral threat from opposition elites.
https://doi.org/10.1017/S1468109919000197
Taiwan’s first two-party contest in 1986 suggested the KMT’s electoral dominance just before
Chiang’s decision to initiate democratic transition (Chao and Myers, 1998; Rigger, 1999). Scholars
note that for the KMT, two strategic manoeuvres were key to the party’s political dominance in the
1980s. The first manoeuvre was the ruling party’s Taiwanisation programme. In a major departure
from its mainland image, the KMT blocked the growth of the opposition party by undercutting
their ability to mobilise the middle class along ethnic identity at elections (Tien, 1975; Winckler,
1984; Tien and Cheng, 1997). Another strategic move, the expansion of the elections at the central
level of the government, also contributed to the KMT’s strong electoral viability. In the early 1980s,
the gradual liberalisation of the central level elections succeeded in exploiting the growing fissures
14 Tian He
within the Tangwai opposition, which ensured that the KMT’s hegemonic position was not threatened
electorally (Winckler, 1984).
In short, the lack of an electoral threat explains the first stage of Taiwan’s democratic transition –
the removal of authoritarian institutions in the late 1980s. There was certainly no need for the KMT to
pursue strategic adaption as they could simply dominate Taiwan’s democratic politics. Therefore, for
the better part of the late 1980s, the KMT ruling elites lacked the willingness to introduce democratic
elections, which explains the period of ‘liberalisation without democratisation’ (Jacobs, 2012: 67).
The case of Taiwan in 1986 clarifies that the level of an electoral threat from opposition elites proves
helpful in explaining ruling elites’ willingness to introduce democratic elections. This conclusion is cor-
roborated by an internal variation within the Taiwanese case. The end of the 1980s saw the Taiwanese
ruling elites’ increased desire for introducing democratic elections. The growth of the KMT’s new-born
desire coincided with the growth of an electoral threat at the end of the 1980s. The background of the
KMT’s electoral decline was the internal split within the ruling KMT elites. The 1989 election was widely
considered a watershed event which marked the beginning of the electoral decline of the KMT. The
KMT began to face even a greater electoral threat in 1991 when the factional dispute within the DPP
‘took a turn for better’. The KMT’s ability to coordinate votes to contain the opposition had been already
undermined by internal strife between Taiwanese soft-liners and more conservative hard-liners in the
1992 election. The ruling party’s electoral viability was further weakened by a party split in 1993. By
the mid-1990s, each party had carved out a fairly stable share of the electorate (Rigger, 1996; Tien
and Cheng, 1997; Chao and Myers, 1998; Chu, 1999a; Clark and Tan, 2012).
The growing electoral threat from the opposition party led to the Taiwanese elites’ strategic actions
to push for the introduction of democratic elections in the early 1990s. The ruling elites’ effort began
with a National Affairs Conference (NAC) in 1990 when political elites agreed on a blueprint for mov-
ing Taiwan’s democratic reform forward. Although the issue of direct presidential elections was not
resolved during the NAC, new electoral rules were established for competitive elections to the two cen-
tral parliamentary organs – the National Assembly and the Legislative Yuan. Finally, with an alliance
between the KMT mainstream and the DPP moderate, the National Assembly finally reached a con-
sensus on the institutionalisation of the direct presidential election during several rounds of constitu-
tional amendments in 1992 and 1994 (Tien and Cheng, 1997; Chao and Myers, 1998; Jacobs, 2012).
Overall, the empirical evidence suggests a strong correlation between two sets of variables: the level
of an electoral threat from opposition elites and ruing elites’ willingness to introduce democratic elec-
tions. While the Korean elites’ willingness for a full democratic transition occurred in the context of a
high level of an electoral threat in 1987, the ruling elites’ lack of incentives to introduce democratic
elections in Taiwan was the result of an absence of an electoral threat in 1986. What provides even
more compelling evidence to my hypothesis is the internal variation offered by the Taiwanese case,
namely that the growth in the Taiwanese ruling elites’ willingness to introduce democratic elections
after the 1989 election coincided with the KMT’s declining electoral viability in the early 1990s.
4. Explaining the transformation of the states in South Korea and Taiwan

As argued earlier, the result of the above two political processes (i.e., the emergence of economic inter-
ests and the transformation of the political foundation of the state) is the emergence of structural and
https://doi.org/10.1017/S1468109919000197
institutional constraints. The last section will show how the emergence of these two types of state pol-
icy constraints led to the transformation of the two states: a rapid transformation process in South
Korea and a two-phase transformation process in Taiwan.
4.1 The rapid transformation of the developmental state in South Korea

A rapid transformation of the developmental state occurred in South Korea immediately after the coun-
try’s transition to democracy. With the rise of institutional constraints emanating from the middle class,
the state could no longer retain its strategic visions: The Sixth Five Year Economic and Social
Development Plan formulated by the Roh government (1988–1993) was not a growth-first economic
plan but a populist vision to generate political popularity (Oh, 1999; Kong, 2000). The Kim
Young-sam government (1993–1998)’s economic drive under the name of segyehwa (Globalisation)
contains contradictory goals of economic growth and chaebol reform (Gills, 1996). In the same period,
a combination of strong structural constraints and institutional constraints emanating from business
elites significantly undermined the state’s leadership role vis-à-vis business elites. Consequently, the
financial liberalisation process was shaped by business elites’ interests in expanding their financial
power, which paved the way for the 1997 financial crisis (Chang, 1998; Chang et al., 1998; Kalinowski
and Cho, 2009; Wang, 2012). At the same time, the concentrated labour interest groups also exerted
strong structural constraints upon the state-business alliance. As a result, the 1996 labour market reform
bill achieved ‘too little to deal effectively with the structural flaws of Korea’s fragmented system of com-
pany unionism, but too much for both capital and labour to remain politically unruffled’ (Kim, 2003: 72).
The levels of both structural and institutional constraints decreased in the period immediately fol-
lowing the 1997 crisis. As ruling elites prioritised the task of economic restructuring, a temporary
renewal of the state’s strategic role was witnessed in all three aspects of the state’s policy mechanism.
First, the Kim Dae-jung (1998–2003) administration’s single-mindedly pushed for the execution of the
structural reform plan externally imposed by the International Monetary Fund (IMF) as an essential
condition for post-crisis recovery (Kong, 2000; Ha and Lee, 2007; Mo, 2008). Second, the state suc-
cessfully pushed the chaebol to trim down their excessive capacity and increase their competitiveness
by the end of December 1999 (see Mo and Moon, 2003; Cherry, 2006; Pirie, 2008). Third, the orga-
nised labour became a partner of the state-business alliance for economic recovery, which created the
essential condition for the state to carry out labour market reforms (Kong, 2000).
The rapid transformation of the developmental state resumed in the late 1990s. With the return of
strong structural constraints generated by business elites, President Roh Moo-hyun (2003–2008)’s
vision of structural reform which was ‘on a collision course’ with the chaebols (Shim, 2003). The
return of structural constraints emanating from organised labour was also clear when the Korean gov-
ernment risked harming the relationship with businesses by making several concessions to avoid the
escalation of labour strikes (Kong, 2000; Han et al., 2010). Recent evidence also suggested the presence
of strong policy constraints emanating from both business elites and organised labour: Neither of the
two of the state’s economic visions to boost economic growth (the ‘Green Growth’ launched by the Lee
Myung-bak government (2008–2013) and the ‘creative economy plan’ formulated by the Park
Geun-hye administration (2013–2017)) were free from strong policy constraints imposed by business
elites (Kalinowski and Cho, 2009; Mundy, 2015). The strong structural constraints imposed by the
organised labour on the operation of the state-business alliance led to the trapped labour market in
the post-crisis period (Han et al., 2010).
4.2 The two-phase transformation of the developmental state in Taiwan

Taiwan’s two-phase transformation process is shaped by divergences occurring in two aspects of the
transformation of the state’s policy mechanism. The first concerns state-led state-business cooperation.
In the 1990s, not only did the business elites lack structural constraints, but they also failed to produce
institutional constraints due to the KMT’s financial independence achieved through the creation of
https://doi.org/10.1017/S1468109919000197
profit-generating Party-Owned Enterprises (POEs) (Chu, 1994, 1999a, 1999b). With the continuation
of the state’s domination over the private sector, the state insulated the driver of Taiwan’s economy,
the SME sector, from business interests (Cheng and Chu, 1999; Chu, 1999b). In the 2000s, the emer-
gence of both structural and institutional constraints generated by business elites led to a rapid decline
of state-led state-business cooperation.12 The result was the end of the state’s strategic actions to pro-
mote the SME sectors by the late 2000s: despite the government’s intention to promote SMEs through
12
The KMT financial independence ended in the 2000s during which the DPP made major efforts to dismantle the KMT’s
business empire.
16 Tian He
innovation-oriented industrial policy, SME owners simply could not compete with large business
interests for essential economic resources provided by the government for industrial upgrading
(Clark and Tan, 2012).
A difference in the formulation of the state’s strategic visions was also observed between the 1990s
and the post-2000 period.13 Similar to the Korean situation, as ruling elites became electoral-minded,
the government’s plan to develop Taiwan into an Asian-Pacific Regional Operations Centre
(APROC) for the mainland market was largely a symbolic vision to strengthen the political profile of
the KMT in the 1990s (McBeath, 1998).14 The erosion of the state’s strategic visions worsened after
2000.15 Between 2000 and 2008, the Cheng Shui-bian administration’s economic policies in regards
to cross-strait economic relations reflected the DPP leader’s desire to retain short-term political support
in the context of strong partisan competition from the KMT (Lin, 2016).16 The partisan visions asso-
ciated with the political identities of the major parties emerged after 2008 were similarly not viable.
While Ma Ying-jeou administration (2008–2016)’s plan revitalise Taiwan’s economy through promot-
ing cross-strait economic integration caused major security concerns in the country (Gold, 1986; Lin,
2016), the economic projects proposed under Tsai Ing-wen administration’s ‘New Southward Policy’
aimed at reducing Taiwan’s dependency on China is expected to ‘face an uphill battle’(Huang, 2017).
The policy constraints emanating from organised labour remained relatively low due to the dispersed
labour interests, which also contributed to the two-phase transformation of the developmental state in
Taiwan. Certainly, the labour’s success in preventing a downward revision of labour laws and forcing the
state to revise the proposed adjustment during the reform of the National Health Insurance System in
the 1990s show that labour constraints did emerge (Ho, 2006b). However, the level of policy constraints
imposed by the organised labour on the state-business alliance is clearly limited for two reasons. First,
the labour’s interest advancement is contingent on the availability of political channels. For example, the
organised labour had to cooperate with the opposition party to shape the regulation of working hours in
2000. Second, they had to make concessions with the state-business alliance in exchange for new labour
gains, which was the case during the revisions of the Labour Standard Law in 1996 and the Economic
Development Advisory Conference in 2001 (Ho, 2006b, 2008; Wang, 2010).
5. Conclusion
This paper has offered a theory to account for the transformation processes of the two East Asian
developmental states. The theory includes three components: (1) ruling elites’ policy choices and
the emergence of economic interest groups (dispersed or concentrated economic interests), (2) the
democratic mobilisation of the middle class and democratic transition initiated by ruling elites, (3)
the emergence of structural and institutional constraints. My empirical analysis shows how this pol-
itical mechanism operated to produce the different outcomes of the states’ transformation processes in
South Korea and Taiwan. My theory suggests that the transformation of the developmental state has
been taking place in a ‘path-dependent’ fashion17: the outcomes of the states’ transformation processes
that we observe today were consequences of the strategic choices made by East Asian ruling elites
concerning political consolidation.
13
Taiwan’s economic development became closely tied to Taiwan’s economic relations with China since the early 1990s.
Two economic trends after the late 1980s explain this: (1) the rapid economic integration between Taiwan and China; and (2)
https://doi.org/10.1017/S1468109919000197
the rise of China as an economic powerhouse in the region.

14
The APROC called for developing Taiwan into a hinterland for Mainland China. The plan would undermine Taiwan’s
national security in the 1990s, especially after the 1996–1997 Taiwan strait crisis.
15
A political background for this development is a partisan divide between two major political blocs emerged by the
mid-2000s: a pro-China Pan-Blue led by the KMT and a pro-Taiwan Pan-Green led by the DPP.
16
These economic policies include ‘Active Opening, Effective Management’ aimed at promoting cross-strait economic
integration and ‘Active Management, Effective Opening’ aimed at slowing down cross-strait economic cooperation. While
the former sought to target the performance-based middle class ahead of elections in the early 2000s, the latter was formu-
lated to retain the support of the Deep Greens at the end of Chen’s presidency.
17
On the concept of ‘path dependence’, see Mahoney (2000); Pierson (2000); Thelen (1999).
The paper focuses on the two known cases of the transformation of the East Asian developmental
state; it should not imply that the decline of the state’s effectiveness in formulating policies is
inevitable. The other typical case of the developmental state – the Singaporean case – shows that
the emergence of economic and political interest groups does not necessarily lead to the emergence
of state policy constraints. An explanation to the non-transformation of the developmental

state requires the development of new theoretical hypotheses to account for the absence of both
constraining economic interest groups and a lack of democratic transition in rapidly industrialising
East Asia.
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Cite this article: He T (2019). Towards a theory of the transformation of the developmental state: political elites, social actors
and state policy constraints in South Korea and Taiwan. Japanese Journal of Political Science 1–21. https://doi.org/10.1017/
S1468109919000197

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Japanese Journal of Political Science (2019), 1–21

Towards a theory of the transformation of the

developmental state: political elites, social actors and

(Received 11 September 2018; revised 20 March 2019; accepted 1 September 2019)

Key words: Democratic transition; the developmental state; ruling elites

1. A theory of the transformation of the developmental state

achieve their respective class inclusion.

country. This discussion leads to my third hypothesis:

2. The rise of the developmental states, industrial structure, economic interests

Figure 1. The transformation of the develop-

Figure 2. Economic Interests, Democratic Transition and State Policy Constraints.

2.2 The emergence of economic interests

2.2.1 Concentrated and dispersed business interest groups

2.2.2 Concentrated and dispersed labour interest groups

3. The transformation of the political foundation of the state

Figure 3. Ruling elites’ democratisation decisions in South Korea and Taiwan.

3.1 Rival explanations

3.2 Elite decision 1: ending an authoritarian rule

3.2.1 Reproduction of a dictatorship in South Korea

3.2.2 The end of South Korea and Taiwan’s authoritarian periods

3.3 Elite decision 2: elites’ willingness to introduce democratic elections

3.3.1 South Korea’s speedy introduction of the democratic election

3.3.2 Taiwan’s slow introduction of democratic elections

4. Explaining the transformation of the states in South Korea and Taiwan

4.1 The rapid transformation of the developmental state in South Korea

4.2 The two-phase transformation of the developmental state in Taiwan

the rise of China as an economic powerhouse in the region.

of state policy constraints. An explanation to the non-transformation of the developmental

Quarterly 22, 1025–1043.

Hopkins University Press.

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