Bacaan 2

This article was downloaded by: [Queensland University of Technology]
On: 13 October 2014, At: 07:44

Publisher: Routledge
Informa Ltd Registered in England and Wales Registered Number: 1072954
Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,
UK
Asian Affairs: An American

Review
Publication details, including instructions for
authors and subscription information:
http://www.tandfonline.com/loi/vasa20
Implications of the Asian

Flu for Developmental State
Theory: The Cases of South
Korea and Taiwan
Cal Clark & Changhoon Jung
Published online: 24 Mar 2010.
To cite this article: Cal Clark & Changhoon Jung (2002) Implications of the Asian Flu
for Developmental State Theory: The Cases of South Korea and Taiwan, Asian Affairs:
An American Review, 29:1, 16-42, DOI: 10.1080/00927670209598874
To link to this article: http://dx.doi.org/10.1080/00927670209598874
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all the
information (the “Content”) contained in the publications on our platform.
However, Taylor & Francis, our agents, and our licensors make no
representations or warranties whatsoever as to the accuracy, completeness,
or suitability for any purpose of the Content. Any opinions and views
expressed in this publication are the opinions and views of the authors, and
are not the views of or endorsed by Taylor & Francis. The accuracy of the
Content should not be relied upon and should be independently verified with
primary sources of information. Taylor and Francis shall not be liable for any
losses, actions, claims, proceedings, demands, costs, expenses, damages,
and other liabilities whatsoever or howsoever caused arising directly or
indirectly in connection with, in relation to or arising out of the use of the
Content.
This article may be used for research, teaching, and private study purposes.
Any substantial or systematic reproduction, redistribution, reselling, loan,
sub-licensing, systematic supply, or distribution in any form to anyone is
expressly forbidden. Terms & Conditions of access and use can be found at
http://www.tandfonline.com/page/terms-and-conditions
Downloaded by [Queensland University of Technology] at 07:45 13 October 2014
Implications of the Asian Flu
for Developmental State Theory:
The Cases of South Korea and Taiwan
CAL CLARK and CHANCHOON JUNG
T he nations of East and Southeast Asia formed the most economically dynam-
ic region in the world during the last third of the twentieth century, as indi-
cated in table 1. In particular, the region experienced economic success in a series
of waves as first one country or set of nations “took off’ (Rostow 1960) on sus-
tained trajectories of rapid industrialization and growth: first Japan in the 1950s;
then the four East Asian “little dragons” or “tigers” (Hong Kong, Singapore,
South Korea, and Taiwan) in the 1960s, then the Southeast Asian “tigers” by the
late 1970s (Indonesia, Malaysia, and Thailand but not the Philippines, which was
languishing under Ferdinand Marcos’s “crony capitalism”); then China in the
1980s; and finally the post-Marcos Philippines by the early 1990s. In the early
1990s, “East Asian dynamism” (Chan 1993) was even canonized by the World
Bank (1993). The World Bank characterized Japan, the four little dragons, and
the three Southeast Asian tigers as “High-Performing Asian Economies” or
HPAEs. In short, there was a widely shared perception that East and Southeast
Asia had been the scene of “miracle economies” (Bernard and Ravenhill 1995;
Chan 1993; Clark and Roy 1997; Cumings 1984; Fallows 1994; Gereffi and
Wyman 1990; Hobday 1995; Hofheinz and Calder 1982; Jomo 1997; Ravenhill
1995; World Bank 1993).
In almost all these nations (Hong Kong is a significant exception), the state
played a major role in the rapid industrial restructuring of the economy. Conse-
quently, their experience became the core for the “developmental state” model of
16
Implications of the Asian Flu for Developmental State Theory 17
Table 1. Indicators of Asian Nations’ Economic Dynamism, 1980-97
Percentage Percentage
GNP Growth Industrial Growth
1980-90 1990-97 1980-90 1990-97
Developed Asia
Japan 4.0 1.4 4.2 0.2
East Asian Tigers

Hong Kong 6.9 5.3 - -
Singapore 6.6 8.5 5.4 9.1
South Korea 9.5 7.2 12.1 7.5
Taiwan 7.9 6.5 6.3 4.5
Southeast Asia
Indonesia 6.1 7.5 6.9 10.2
Malaysia 5.2 8.7 7.2 11.2
Philippines 1.o 3.3 -0.9 3.7
Thailand 7.6 7.5 9.9 10.3
Communist Tiger
China 10.2 11.9 11.1 16.3
World Avg. 2.9 2.5 2.8 -
Sources: Taiwan Staristical Dara Book (1999): 1-2, 11, and 46.
World Bank (1999): 192-193,202-203. and 210-211.
industrialization, a theory that argues that “strong and autonomous developmen-

tal states” can lead economic transformations and prevent dominant interests in
a society from engaging in rent-seeking activity. Thus, the growth of the admin-
istrative capacity of the East and Southeast Asian regimes, through the develop-
ment of a skilled corps of administrators and technocrats, was viewed as provid-
ing a key explanation for their rapid economic development (Amsden 1989; Chan
1993; Clark and Roy 1997; Evans, Rueschemeyer, and Skocpol 1985; Fallows
1994; Hofheinz and Calder 1982; Johnson 1982; Wade 1990, White 1988).
The recent financial crisis in East and Southeast Asia, however, stimulated con-
siderable criticism of the developmental state model, especially from the neoclas-
sical perspective that public officials will almost inevitably distort an economy
when they intervene in the pursuit of political goals. Robert Wade (1998) has rather
sarcastically labeled this the “Death Throes of Asian State Capitalism” perspec-
tive. According to Robison and Rosser, (1998): “With governments under intense
pressure to accept change, IMF policy-makers and other liberals [i.e., neoclassi-
cists] saw the crisis as a blessing in disguise and an opportunity to sweep away long-
standing market distortions and practices of state intervention . . .” (1594).
18 Asian Aflairs
In this article we examine the Asian financial crisis or “Asian flu” to draw impli-
cations about the developmental state model in general and “Confucian capital-
ism” in East and Southeast Asia in particular. In the first section we provide an
overview of the developmental state model, and in the second we briefly sketch
two very different critiques of the model (laissez-faire economics and the argu-
ment for “bringing society back in”). The causes of the Asian flu are then consid-
ered. In the fourth section we elaborate the preceding general description of the
Asian flu using case studies of South Korea and Taiwan. Finally, we argue that
although the Asian flu challenged the theory of the developmental state, the dom-
inant laissez-faire critique of statism in East and Southeast Asia misses the mark.
Both conceptualizations of these political economies, and their prescriptions for
economic reforms in them, need to be more nuanced and less deterministic.
The Logic of the Developmental State Model
The model of the developmental state rests on two assumptions concerning the
processes of development in the Third World:
First, that most developing nations are at such a disadvantage in the world
economy that market forces themselves preclude significant industrial growth
Second, that the state, in at least some of these nations, possesses the power
to overcome the barriers facing “late developers”
These two assumptions reflect what might respectively be termed the demand
for and supply of state economic leadership in the political economies of devel-
oping nations (for more detailed discussions of the developmental state model,
see Alam 1989; Amsden 1989; Chan, Clark, and Lam 1998; Evans, Rueschemey-
er, and Skocpol 1985; Johnson 1982; Moon and Prasad 1994; Onis 1991; Wade
1990; White 1988).
In terms of demand, there is widespread agreement about several fundamen-
tal prerequisites for development that are extremely hard for the private sector in
developing nations to attain on its own. First, there needs to be a basic stock of
investment capital. Second, even given adequate financial resources, human skills
are essential, both for entrepreneurship and for a minimally skilled work force
(skill requirements escalate quickly as a nation moves up the international prod-
uct cycle). Finally, development activities in the Third World (generally sooner
rather than later) come into competition or conflict with foreign corporations
and/or countries that wield considerable market power. Therefore, an ability to
deal with external forces must be created as well.
Even accepting the first stage of the statist argument-that there is a demand
for state developmental activities-a second stage in the line of logic is needed
justifying the presumption that there is a supply of such economic policy help
available for economies attempting to industrialize. According to the statist par-
adigm, “strong and autonomous developmental states” are able to meet this chal-
lenge. Three institutional characteristics-strength, autonomy, and developmen-

tal commitment-must be present if a government hopes to supply the develop-
mental support that its society and business community may demand.
According to this model, developmental states are viewed as “strong” in the
sense that they can effectively implement their policies. This capability, in turn,
is based on two subdimensions or factors. First, the policies must be accepted by
the broader society because of some combination of personal benefit and self-
interest, belief that the government is acting legitimately, and fear of the repres-
sive might of the regime. Second, the policies themselves must be well designed
and appropriate. Here, some of the important conditions include the existence of
a well-educated bureaucracy and the absence of debilitating political infighting.
The second characteristic, “autonomy,” means that state officials can act inde-
pendently of pressures from social groups, especially dominant classes who try to
use their influence to prevent change that would threaten their vested interests
(Rueschemeyer and Evans 1985). This can occur when the bureaucracy is both
protected and respected by a strong executive leader who, to use the words of
Chalmers Johnson (1982), chooses to “reign but not rule.” As a result of such a
situation, economic decision makers within the government are able to take a long-
term perspective on the national interest, resist pressures for rent-seeking, and
make long-term investmentsthat might not be justified by short-term market logic.
Third, of course, a strong and autonomous state must be fundamentally com-
mitted to treating development as a high priority, rather than distributing patron-
age to political clients, preserving the status quo in society, providing a social
welfare net for the population, forwarding the national interest through a mili-
tarism, engaging in “predation” (Evans 1995) to line the pockets of its leaders, or
any other potential objective. Without such a developmental commitment, a state
will use its capabilities for something else, while without strength and autonomy
a state will not be able to deliver on any developmental commitments it might
have. Moon and Prasad (1994) summarize this stereotype of the East Asian devel-
opmental states nicely:
Executive dominance allows political leaders to create and expand spaces for
bureaucratic rule. Bureaucratic agencies in the East Asian developmental states are
highly structured and competently staffed. . . . The organization is composed of
highly capable individuals screened and recruited through cut-throat open compe-
tition. They are analytically adept, and technically competent. Bureaucrats in the
developmental states are also united in purpose, and show an unusually high degree
of congruence with organizational and national goals. Such unity of purpose mini-
mizes bureaucratic in-fighting and enhances inter-agency consensus and coordina-
tion. Furthermore, meritocratic practices originating from the Confucian tradition
and elite social status prevent public bureaucrats from being “captured” by rent-
seeking social groups. (362-63)
It is also valuable to take a closer look at the micropolicies and activities that
are attributed to developmental states. According to the theory of the develop-
20 Asian Affairs
mental state, government technocracies can perform a valuable leading role for
several central tasks in the national development project. These encompass three
different types of government activities.
The ftrst group of activities involves the creation and maintenance of a sound
business environment without which a market economy could not operate. Most
such activities are ones considered necessary by neoclassical economists. Such
governmental functions include maintaining political order (including holding
political corruption and “squeeze” on businesses within acceptable bounds); cre-

ating a stable legal order for market relationships; using fiscal and monetary pol-
icy to curb inflation and dampen the business cycle; and financing expensive phys-
ical infrastructure projects (e.g., highways, railroads, harbors, and airports) that are
vital for commerce and business expansion. Another policy falling under this
rubric may be termed “state &activism” in the economy, such as the privatization
of state corporations and market liberalization, a common method for moving from
import substitution to export-led growth (Balassa 1981; Balassa et al. 1989). More
broadly, the state can minimize the drain of resources away from the private sec-
tor by limiting the size of government and “unproductive” activities, such as mil-
itary spending and welfare programs and bureaucracy in general.
Direct state activism in the economy represents the second category and con-
stitutes the core of what is usually termed a developmental state. It is these poli-
cy areas that create the fundamental divide between the statist approach and neo-
classical assumptions that governments simply cannot perform such functions
effectively and efficiently. Statists, in sharp contrast, advocate more stimulative
macroeconomic policies than are necessary for stability in the expectation that they
can generate a virtuous cycle of self-reinforcinggrowth. More fundamentally, sta-
tists believe that a government in a “late industrializer” should take a leading role
in financial mobilization and allocation to ensure that financing is effectively used
and targeted. Control over finance is the first step toward an activist industrial pol-
icy, as the provision of capital represents one of the prime means to target an indus-
try, along with tax relief, other types of subsidies, research and development assis-
tance, creating actual state enterprises, and trade protection. These tools can also
be used to enforce performance standards on particular industries and firms. Final-
ly, statists also want governments in the developing world to take a strong role in
negotiating with foreign corporations and countries. Trade policy is important,
especially with rising protectionism in the industrial world. Statists have a some-
what ambiguous view of foreign capital, viewing it as a source both of valuable
funds and technology and of fierce and perhaps unfair competition for local indus-
tries. Consequently, they advocate state controls over foreign multinational cor-
porations (MNCs) to ensure that they contribute to the national development pro-
ject, rather than simply exploiting local resources. More broadly, the state can
move beyond policies toward single industries by promoting the general structur-
al transformation of an economy (e.g., from import substitution to the export of
light industrial goods, from light industry to heavy industry, and so forth) and can
create systems for large-scale economic planning.
A third dimension emerges from the work of scholars committed to the “basic
human needs” approach. They urge what might be called “social” activism in
addition to economic activism. This can be justified on normative grounds
alone-that is, development is not really occurring unless the bulk of the popu-
lation in a country benefits from economic growth. However, the growing empha-
sis on human capital as an important source of growth suggests that the creation
of an educated and healthy society may actually promote growth in the long term.
Recent comparative analysis, for example, suggests that investment in human
capital has a positive long-term effect on economic performance (Clark and Roy
1997; Moon 1991; Moon and Dixon 1992).
Critiques of the Developmental State Model
The developmental state model has been subjected to trenchant criticism from
two very different sources. The first is from the laissez-faire or neoclassical per-
spective and can be seen as a reaction against state economic failure in three dif-
ferent contexts: First, the 1980s witnessed the collapse of state socialism, due in
large part to its profound economic inefficiencies (Campbell 1991; Kovacs 1994;
Pei 1994). Second, the deteriorating economic performance of most Western wel-
fare states during the 1980s and early 1990s was generally blamed on large gov-
ernment bureaucracies that dragged down economic vitality (Gourevitch 1986;
Nau 1990; Peters 1991). Third, most of the Third World was especially hard hit
by the world economic crisis of the 1970s and 1980s, which was blamed on the
large state role in those economies, especially as the biases and predatory activ-
ities of many governmental officials came to light (Bates 1981; Evans 1995).
Thus, a consensus arose, at least among those normally most able to shape the
context within which Third World development takes place, that governments
should get out of the marketplace and let the “invisible hand” of the market work
its magic (Balassa 1981; Balassaet al. 1989; Bhagwati 1978, 1993; Friedman and
Friedman 1980; Gilder 1984; Linder 1986).
Both the laissez-faire and developmental state models date to the early 1980s.
Their contention throughout much of the 1980s and 1990s explains why neoclas-
sicists were so eager to use the Asian financial crisis to proclaim “the death throes
of Asian state capitalism” (Wade 1998). A much different and more recent chal-
lenge to the developmental state model comes from a perspective that argues for
“bringing society back in” (Clark and Roy 1997; Migdal 1988). The central argu-
ment here is that the state per se (and in combination with the market) provides an
insufficient explanation for readily observable differences in developmental out-
comes. Thus, recourse is necessary to additional variables denoting state-society
relations and the business environment-ntrepreneurial talents, the foundation of
22 Asian Aflairs
human capital, the incentives and disincentives for various types of economic activ-
ities, and more broadly, the sociopolitical institutional setting and the cultural envi-
ronment in which a political economy operates (Chan, Clark, and Lam 1998; Clark
and Roy 1997; Evans 1995; Migdal 1988; Migdal, Kohli, and Shue 1994).
Ironically perhaps, these advocates of moving “beyond the developmental
state” contend that the statist argument that neoclassical economics does not rec-
ognize the processes by which markets operate in the “real world” can be turned
against the developmental state model as well for two compelling reasons. First,
state economic policy, according to this line of reasoning, does not emerge as a
rational response to an economic situation by a unified, omnicompetent political
institution. Rather, different groups of officials and/or parts of the state compete
over policy, and in many instances, their interests and goals can only be under-
stood by reference to their interaction or identification with nonstate actors (i.e.,
components of society). Second, it is extremely rare that “market conforming”
economic behavior is dictated by state policies alone. Rather, private individuals
and groups respond at least somewhat independently to the market signals and pol-
icy incentives that they perceive. Again, it is important to understand how and why
specific segments of society act, rather than to assume that the logic of the market
or state policy will automatically produce certain economic outcomes. Thus, just
as statism argues that the neoclassical model of economic markets is too simplis-
tic, it is now coming under fire itself for proposing an oversimplistic model of how
governmental policy is made and how policy interacts with market forces to influ-
ence a nation’s economic and social performance (Moon and Prasad 1994).
The experience of East and Southeast Asia provides an interesting test for these
critiques. Given the spread of East Asian export dynamism to Southeast Asia and
China during the 1980s, it might seem reasonable to suppose that these nations in
other parts of Asia had finally learned from East Asia’s model of the developmental
state that had first been developed by Japan. In particular, the power and leader-
ship of the skilled technocracies in the East Asian tigers were widely given cred-
it for charting a course of industrial development and upgrading that moved their
nations through several fundamental transitions, from agriculture to labor-inten-
sive light industry, to heavy industry, to advanced high-tech production. Such state
elites, moreover, did not intervene in the economy to distort markets and protect
monopoly rents. Rather, after short periods of “infant industry” protection, they
pursued market conforming strategies and promoted exports and integration into
the world economy, in contrast to the import substitution strategy of industrial-
ization followed in most other parts of the Third World. These developmental
states were able to implement such industrial policies because the state assumed
control of the national financial systems, thereby gaining the power to direct
investment into “sunrise industries,” and developed close working relationships
with the business community. State power was also used to control and channel
the activities of MNCs, to prevent traditional elites and vested interests from hold-
ing back change, and to suppress labor activism to hold down wage costs (Ams-
den 1989; Fallows 1994; Johnson 1982; Prestowitz 1988; Wade 1990; Woo 1991).
The brief summaries of the Asian political economies that we provide in table
2, however, cast considerable doubt on that stereotype of the East Asian devel-
opment model. The developmental state model fits capitalist East Asia (Hong
Kong excepted) quite well. Yet whatever else may be included among the causes
of the recent economic transformations in other countries of Asia, leadership by
a strong developmental state was not one of their characteristics. In fact, even the
successful developmental states in East Asia appear to be deteriorating.
Perhaps ironically, capitalist East Asia (Japan and the four little dragons) itself
does not conform to the argument that a strong developmental state comes close
to being a necessary and sufficient condition for strong economic performance,
since the role of government varies considerably among these five political
economies. -0 of the East Asian countries, Japan and South Korea, have arche-
typical developmental states, which implemented strong industrial policies sup-
porting the push of large domestic corporations to become “national champions”
in most of the world’s leading industries (Amsden 1989; Fallows 1994; Fields
1995; Hahm and Plein 1997; Hart 1992; Johnson 1982; Mardon and Paik 1992;
Okimoto 1989; Woo 1991). Yet even in Japan many industrial sectors do not con-
form to the developmental state model, either because business provided the pri-
mary leadership, sometimes directly ignoring government “guidance” (Friedman
1988),or because business-government relations were primarily clientistic (Calder
1993).Furthermore, as indicated in the second column of table 2, both these devel-
opmental states appear to be heading toward an eclipse. In South Korea, democ-
ratization and the developmental state’s very success in creating strong conglom-
erates or chaebol have clearly undercut the autonomy and leadership power of the
technocracy (Hahm and Plein 1997; Heo 2001; Heo and Kim 2000; Kim 1999).
Japan appears to be suffering from a variety of ills deleterious to its vaunted devel-
opmental state: political gridlock in the domestic arena, a state bureaucracy now
primarily concerned with protecting its power over the economy, and gross cor-
ruption in business-government relations (Browne and Kim 2001; Calder 1993;
Clark and Roy 1997; Hatcher 1998; Laurence 1999; Woodall 1996).
The other East Asian dragons have significantly different types of political
economies. Singapore has a strong developmental state, but it has pursued a dif-
ferent strategy of “growth through invitation to multinational corporations,” which
came to dominate Singapore’s economy (Mirza 1986; Rodan 1989). However,
Hong Kong (at least before its reversion to China) has had what may be the clos-
est approximation to a laissez-faire economy in the world (Rabushka 1979; Wong
1988). Taiwan occupies something of a middle position (Chan and Clark 1992). It
has been touted as a very successful developmental state (Gold 1986; Haggard
1990; Wade 1990) because state policy instituted the major structural shifts in the
economy. Yet much of Taiwan’s dynamism, especially in the key export sector,
Table 2. State and Development in Asia

~~~ ~
h)
P
Primary State Economic Role
During Industrialization Recent Changes in Political Economy
East Asian Big Capitalist Dragon

Japan Effective developmental state Growing bureaucracy and corruption
based on business-government undercut developmental state
cooperation
East Asian Little Capitalist Dragons
Hong Kong Provide strong legal framwork for Little change; new administration
business; cheap housing subsidy for both pro-PRC and probusiness
low-wage enterprises
Singapore Strong developmental state: recruit Little change
MNCs and state corporations
South Korea Effective developmental state with Growing chaebol power and democ-
strong state leadership racy undercut developmental state
Taiwan Developmental state in heavy State power declining; major

industry and regulate MNC, but movement of low-tech manufactures
dynamism from small independent to China
“guemlla capitalists”
Communist Dragon
China Command economy; heavy industry Market liberalization and guanxi
push capitalism in 1980s
Southeast Asia
Philippines From crony capitalism to macro- Some, but limited, reforms
economic stabilization
Malaysia, Thailand, and Indonesia b
Some development policies but no Market liberalization and switch from
strong state in the manner of East import substitution to export-based
Asian dragons industrialization
2a
comes from small-scale firms with few ties to the government, whose adeptness
at flexible entrepreneurship has been called “guerrilla capitalism” (Greenhalgh
1988; Lam and Clark 1994; Lam and Lee 1992; Skoggard 1996).
A survey of the other regions in Asia raises even more questions about the
developmental state model. Since the late 1970s, the PRC has had perhaps the
most dynamic economy in the world (which must make most neoclassicists
blanch). Yet, the dynamism comes not from the state-dominatedparts of the econ-
omy but from entrepreneurial firms and organizations, both domestic and mod-
em. Moreover, corruption or “guanxi capitalism” (in which connections with
powerful officials are necessary for doing business) is widespread in China
(Cheng 1990;Harding 1987;Lardy 1998; Naughton 1995;Vogell989). In South-
east Asia, the state structures tended to be somewhat weaker and open to social,
especially business, pressures. Thus, few (if any) analysts give much credit for
these nations’ rapid growth to state leadership. Rather, there were strong clien-
telistic links between business and top leaders that were marked more by payoffs
for doing business than by positive state support, with the “crony capitalism” of
the Marcos regime marking an extreme example (Gomez and Jomo 1997; Hutch-
croft 1994; Jomo 1997; MacIntyre 1994; Pye 1985). Perhaps more tellingly for
testing the developmental state model, the transformation of these economies
from import substitution to export orientation-which appeared to be successful
before the summer of 1 9 9 7 4 i d not involve state-directed development policies
in the manner of Japan, South Korea, and Singapore. In direct contrast, econom-
ic reform in these countries, as in China, was primarily based on market and trade
liberalization, that is, the withdrawal, not the intensification, of state controls
(Haggard and Kaufman 1995; MacIntyre 1994).
This brief synopsis of the political economies in East and Southeast Asia indi-
cates that there are limits to the applicability of the developmental state model.
Major differences exist in the state’s role in these economies, and state policies
have clearly been erroneous and ineffective in many instances. Yet, the results
summarized in table 2 give little comfort to the laissez-faire critics of statism.
With the exception of Hong Kong, state intervention in these economies was per-
vasive; yet, their economic performance was extremely strong throughout most
of the 1980s and 1990s (see table 1). Thus, the central question is not the debate
between the statists and neoclassicists over whether government or the market is
the driving force behind successful economic development. Rather, we should
focus our attention on what policies will work under specific economic and social
conditions, as argued by the “bringing society back in” perspective.
The Asian Flu

Just when Asia’s ascendance as the “rising sun” of the world economy seemed
to have become almost universally acknowledged, its economic success came
26 Asian Affairs
Table 3. The Crash of the Asian Tigers
Percentage Change in Percentage Change in Percentage

Exchange Rate with Stock Market Index Real GDP Growth
US$ June-Dec. 1997 June-Dec. 1997 1996 1997 1998
Southeast Asia
Indonesia -44.4 4 . 6 8.0 5.0 -13.9

Malaysia -35.0 -44.8 8.6 7.8 -8.1
Philippines -33.9 -33.5 5.7 5.1 -1.9
Thailand 43.7 -29.3 5.5 -0.4 -8.0
East Asia
Hong Kong 0.0 -29.4 4.9 5.3 -5.7
Singapore -15.0 -23.0 6.9 7.8 -0.8
South Korea -47.7 49.5 7.1 5.5 -5.3
Taiwan -14.8 -9.3 5.7 6.9 3.7
Sources: Economist (1999): 100; Goldstein (1998): 2-3.
under severe challenge from the Asian financial crisis of 1997 and 1998. In the
summer of 1997 the crisis erupted in Southeast Asia when stock market prices
and exchange rates drastically dropped. It then moved northward into East Asia,
especially South Korea. Clearly, many of these economies were experiencing dis-
locations far beyond the normal business cycle. Moreover, policy failures
throughout the region exacerbated the economic crisis; and many tales about
“crony capitalism” indicated deep social problems.
To those not paying close attention to Southeast Asia or international capital
flows, the crisis began almost innocuously when Thailand’s government
announced on 2 July 1997 that it would (could) no longer support the value of
the Thai baht that had been pegged to the U.S. dollar. The consequences, how-
ever, were both immediate and dramatic. The baht plummeted, leading to a rapid
outflow of foreign capital. Capital flight and the falling exchange rate combined
to wreak havoc on the stock market. The economic crisis quickly spread from
Thailand to its neighbors in Southeast Asia (Indonesia, Malaysia, and to a some-
what lesser extent the Philippines), then jumped to South Korea in Northeast Asia,
and finally threatened such distant “developing markets” as Russia and Brazil
(Arndt and Hill 1999; Friedman 1999; Goldstein 1998; Horowitz and Heo 2001;
Wade 1998).
As summarized in figure 1, the crisis was primarily the result of financial fail-
ure ironically resulting from the influx of foreign capital that occurred during the
early and mid 1990s. The cycle was set off by western pressure to open those
economies, which were increasingly seen as lucrative investment opportunities,
with sustained records of high growth, booming stock markets, high interest rates,
and currencies pegged to the U.S. dollar (which was believed to ensure the
exchange rate stability vital for investment security). Even the reputation that
many of the countries had for “crony capitalism” did not discourage investors;
instead investors thought that the governments would bail out their “crony” finan-
cial institutions and corporations should disaster strike.
Once their international capital regimes were liberalized, a flood of foreign cap-
ital poured into Southeastand capitalistNortheast Asia. Yet, this huge surge of cap-
ital, rather than financing increased productivity and growth, triggered the crisis.
Those economies could not offer enough productive investment opportunities for
the large amounts of capital coming in. This situation, when compounded by the
concomitant deregulation of the national financial systems and the less savory
aspects of corruption and crony capitalism that existed throughout much of the
region, led to growing speculation, particularly in real estate and stocks. Ulti-
mately, many investments turned bad, which quickly set off a cycle of financial
failures. Pressure for devaluation increased, undermining the ability of domestic
financial institutions and corporations to service their debt, which in turn set off a
new round of the downward cycle (Burkett and Hart-Landsberg 1998; Cole and
Slade 1999; Goldstein 1998; Knight 1998; Laurence 1999; Malun 1999; Norton
1998; Robison and Rosser 1998; Taylor 1998; Wade 1998; Wagner 1998).
As illustrated by the data in table 3, the crash of the Asian tigers was indeed
spectacular. By 31 December the value of the national currencies of Indonesia,
Malaysia, the Philippines, South Korea, and Thailand had dropped by approxi-
mately 35 to 45 percent against the U.S. dollar (only the Indonesia rupiah con-
tinued this downward trend in 1998). Stocks tumbled by about 25 to 50 percent
in all these countries except Taiwan (before stabilizing in early 1998). The impact
on economic growth was a little more delayed. For 1997 as a whole, all except
Thailand had robust GDP growth in the 5 to 8 percent range; and even Thailand’s
economy declined only slightly, by 0.4 percent. In 1998, however, the growth fig-
ures were reversed. Indonesia approached economic implosion (which stimulat-
ed the political explosion that forced President Suharto from office) with a neg-
ative growth rate of -14 percent; the Malaysia and Thai economies shrank by 8
percent; there were strong recessions in Hong Kong and South Korea, with GDP
declines of about 5.5 percent; and only Taiwan experienced a positive rate of
growth. When Japan’s prolonged economic stagnation and recession of the 1990s
is added to the picture, the transformation of a regional economic “miracle” into
a “crisis” is complete.
The conventional image of debt crises in developing nations is certainly one
of government failure. According to this laissez-faire logic, incompetent govern-
ments borrow extravagantly to finance social services, unproductive development
projects, or the bank accounts of corrupt politicians; liberal monetary and fiscal
policies fan the fires of inflation. Sooner or later the debt on those unproductive
uses can no longer be serviced, setting off a debt crisis. All would be well if gov-
Figure 1. Modeling the Asian Financial Crisis
Deregulation of Short-Term
Financial Systems Borrowing
Growing Speculation in
Crony
Real Estate and Stocks
Capitalism
? 1
Currencies Pegged to U.S. $ Perceptions of Increashgly, Bad
(Exchange Rate Stability) Government Investments and
“Guarantees” Financial Failures
\
High
Growth
Percevtions of
/
Booming
\ / I Pressures For
Devaluation
Stock
// ‘;--.-.
Hi@y Foreign Capital in
Markets Early and Mid-1990s
Liberalization of
International Capital / Stock Market and
High Flows Under U.S. Currency Crashes
Interest and UIF Pressure
Rates
/
ernments would allow the “magic of the marketplace” to operate. This scenario,
however, did not hold in East and SoutheastAsia. The crisis was preceded not by
an increase in governmental intervention but by the liberalization, under pressure
from the United States and the International Monetary Fund (what Wade [1998]
calls the “Wall Street-Treasury-IMFComplex”), of both the domestic financial
systems and international capital flows in most of the tigers. In fact, the Asian flu
represented the first internationaleconomic crisis in the postwar era in which both
the lenders and the creditors were overwhelmingly in the private sector.
Market failure, therefore, seems just as much to blame as government failure, if
not more so. Private financial institutions and corporations freely entered into trans-
actions that led to disaster. If this is capitalism, it would seem to be the Marxist ver-
sion, in which capitalism contains the seeds of its own destruction! Nevertheless
this instance of market failure is almost universally attributed to government fail-
ure to regulate local financial markets effectively (Burkett and Hart-Landsberg
1998; Goldstein 1998; Kim 1999; Knight 1998; Norton 1998; Robison and Ross-
er 1998; Taylor 1998; Wade 1998). Since the major task of a developmental state
is to use the powers of government to lead and shape national development pro-
jects, the East Asia flu can be taken as evidence of the failure of the developmen-
tal states in East and Southeast Asia. However, this failure does not indicate the
need to replace the statist model with laissez-faire logic so much as it raises the
question of how to reconstitute or create effective developmental states in Asia.
Case Studies of South Korea and Taiwan

As sketched in table 2, South Korea and Taiwan had distinctive political
economies. In South Korea, the authoritarian military regime of President Park
Chung Hee established a strong, effective, and ultimately successful develop-
mental state. During the 1980s and especially the 1990s, however, this develop-
mental state degenerated both in its ability to lead the economy and in the wis-
dom of its policies. Consequently, the strong impact of the Asian flu on South
Korea in late 1997 and early 1998 was primarily caused by an unregulated finan-
cial system that permitted irrational market behavior. The state in Taiwan had
played a leading role in promoting development, but its powers were far more cir-
cumscribed than those of the South Korean government. In particular, the dynam-
ic core of the economy, especially the export sector, was formed by highly entre-
preneurial small firms that remained fairly isolated from the government. In terms
of the financial system, those f m s relied on a largely informal and unregulated
“curb market” which, in theory, was subject to the same abuses as Korean finance
in the late 1990s. Yet the small scale of this informal financial system effective-
ly isolated it from the flows of foreign “hot capital” that exacerbated the crisis in
such tigers as South Korea and Thailand and resulted in a fairly high degree of
state autonomy that allowed the government to handle the crisis effectively.
30 Asian Affairs
Overall, these two case studies make one skeptical about the orthodox laissez-
faire arguments. South Korea’s problem was insufficient, rather than overly tight,
regulation of the financial system. The second case study, moreover, has the
somewhat unsettling implication that distorted policies and institutions can some-
times work. In Taiwan, ironically, the mild impact of the Asian financial crisis
(see table 3) can probably be attributed to the “underdeveloped” financial sys-
tem-a rigid and bureaucratic, formal system and a highly entrepreneurial “curb
market” that by a weird coincidence produced “prosperity from countervailing

perversities” (Clark 1997) and constrained opportunities for highly leveraged
“casino capitalism.” The Taiwan example also points to a broader result embar-
rassing for both neoclassicists and statists in that the other parts of Asia that
escaped the flu (China and South Asia) are marked both by grossly distorted mar-
kets and by states whose “developmental” credentials are quite tattered.
South Korea
South Korea’s rapid economic growth and industrial transformation following
the devastation of the Korean War have been widely attributed to its strong devel-
opmental state, which formulated and implemented a wide-ranging industrial pol-
icy based on tight control of the financial system. In the 1950s, South Korea used
protectionism to encourage import substitution in light industry; and in the mid-
1960s it engaged in a major transformation in strategy to export its labor-inten-
sive manufactures. By the 1970s, South Korea was ready to upgrade to “sec-
ondary import substitution’’-that is, the state-sponsored development of the
heavy, chemical, and high-tech industries. Turning to the effects of this policy,
the rapidity with which Korea became internationally competitive in these indus-
tries is almost breathtaking. In the decade and a half between 1971 and 1984, for
example, heavy industry’s share of total industrial production rose by half, from
40 to 62 percent. Even more impressive is the tremendous transformation of
South Korea’s export mix. In 1971, heavy industrial products constituted just 13
percent of all industrial exports, demonstratingthat the heavy industries were pri-
marily import-substitution ones. In 1984, in very sharp contrast, they formed 60
percent of industrial exports, almost exactly the same as their proportion of indus-
trial output (Amsden 1989; Chu 1989; Haggard and Moon 1983,1990; Jones and
Sakong 1980; Kang 1989).
To promote rapid industrializationthe government resorted to a battery of pol-
icy instruments, including the allocation of financial credit, production subsidies,
tariff protection, export quotas, and tax rebates to influence entrepreneurial incen-
tives. The financial system was probably the most important and distinctive pol-
icy instrument in the state arsenal. South Korea has had extreme governmental
control of its financial system, including the large amounts of funds borrowed
abroad. This has allowed the government both to funnel the funds to enterprises
selected as “national champions” in a specific industry and to enforce “perfor-

mance standards” by threatening to withdraw credit if production, export, or qual-
ity goals were not met (Amsden 1989; Fields 1995; Wade 1985; Woo 1991).
Such a strategy of financial control can only work when there are a relatively lim-
ited number of economic players-as in the case in South Korea, where large busi-
ness groups or chaebol dominate the economy. In the 1980s, for example, the top
five Korean chaebol accounted for just over half of GNP. The heavy industrializa-
tion campaign, in fact, was the major factor stimulating this concentration of nation-
al champions. In the decade between 1974 and 1984, the sales of the top five chae-
bol skyrocketed almost fivefold from 12 to 52 percent of GNF’.Until the early 198Os,
the state essentially dictated to the business community, even the large chaebol
(Amsden 1989; Hahm and Plein 1997; Kang 1989; Moon 1988,1990; Shin 1991).
South Korea also stands out for its statist practice of placing stringent limits
on direct investment in Korea by foreign MNCs. However, restrictions on foreign
capital were not aimed at simple exclusion. Rather, the regime acted to channel
MNCs into a few high-priority sectors and to regulate them to maximize their
contribution to the development of Korean national champions. According to this
strategy, foreign investment in an industry would be solicited but would only be
allowed in the form of joint ventures with domestic f m s . Once the domestic part-
ner learned the business and the technology and was strong enough to carry on
operations on its own, the MNC would be forced to divest itself (under the terms
of the original contract), thereby leaving a new industry in local hands (Amsden
1989; Haggard and Moon 1983, 1990; Mardon 1990; Mardon and Paik 1992).
Finally, the heavy industry program is also quite instructive for testing the neo-
classical and developmental state models in the Korean context. Because the
state’s links with and control over private industry were quite strong, South Korea
was able to take a very aggressive strategy, which ultimately proved successful
in upgrading into such heavy industries as automobiles, steel, and petrochemicals
(Amsden 1989; Mardon 1990; Mardon and Paik 1992; Wade 1990). The ability
to defy the short-term logic of the market by launching such a big push is con-
sistent with the statist critique of laissez-faire, but more than a developmental
state was in operation within South Korea’s political economy. First, most of these
heavy industries were privately owned. Thus, their ultimate success rested on the
efficacy of the chaebol, not the developmental state. For example, the upgrading
in semiconductors primarily was the result of private initiative in an area that state
policymakers relatively ignored (Hong 1992). Second, while the heavy industry
strategy ultimately succeeded, it did so only after a decade of economic imbal-
ances, which caused considerable criticism and political upheavals that signifi-
cantly altered the nature of the regime (Haggard and Moon 1990; Hahm and Plein
1997; Moon 1988, 1990). Thus, even the “victory” of the developmental state in
South Korea points toward the value of looking “beyond the developmental state”
(Chan, Clark, and Lam 1998).
32 Asian Affairs
The developmental state in South Korea was based on a tight linkage between
the government and the country’s large business groups or chaebol, which acted
as national champions to spearhead South Korea’s rapid industrialization. The
government provided cheap funding to the chaebol through its control of the
domestic financial system and the guarantees that it provided for foreign loans to
private Korean corporations. In return, the chaebol gave large contributions to the
ruling party. Such a system obviously had the potential to degenerate into crony
capitalism, but through the early 1980s the state enforced performance standards
on the chaebol, which forced them to use their cheap financing productively.
The system began to unravel in the 1980s as strains developed in the previ-
ously cozy relationship between big business and the military regime. The Chun
regime, which seized power in a bloody military coup in 1981, began this trend
when it attempted (unsuccessfully) to gain popular legitimacy and support by dis-
tancing itself from the chaebol. South Korea’s increasing democratization in the
late 1980s and early 1990s pushed the trend further. The government then began
to withdraw its control over the economy, especially the financial system, which
allowed the chaebol to pursue their own interests. This trend began under the
Chun regime, which recruited laissez-faire economists into top policymaking
positions in the manner of the Pinochet regime in Chile. It culminated with a very
considerable deregulation of financial markets in the early 1990s as part of South
Korea’s reforms aimed at gaining membership in the Organization for Econom-
ic Cooperation and Development (OECD). This allowed the chaebol to gain
access both to the riskier “curb market” in South Korea’s domestic economy and
to direct foreign loans. Without government controls, these funds were invested
in increasingly risky ventures following the general pattern of financial degener-
ation outlined in the previous section.
South Korea started showing signs of economic and particularly financial
stress in 1996 and early 1997 (e.g., slowed growth and the Hanbo Steel bank-
ruptcy). Yet there was little fear of incipient crisis until the collapse of the Thai
baht at the beginning of July 1997, which turned the spotlight on Korean finances
for two distinct reasons. First, Korean financial institutions and chaebol had bor-
rowed heavily in the international market to pursue speculative ventures in Thai-
land. Second, the collapse of Thailand’s currency, stock market, and financial sys-
tem sensitized the international community to similar conditions that existed in
South Korea: a huge amount of short-term borrowing, the high debt-equity ratios
of Korean corporations and high share of nonperforming loans of Korean banks,
and the speculative nature of much of corporate Korea’s investment. South
Korea’s crisis followed the pattern of the Thai crisis almost exactly. Between
August and November, approximately $2 billion in foreign investment fled the
country, putting tremendous pressure on the won. The government, through the
central bank (Bank of Korea), tried unsuccessfully to support the won and used
up the nation’s foreign reserves in the process. Ultimately, the won crashed and
the government was forced to negotiate a $50 billion bailout from the Interna-
tional Monitary Fund (He0 2001; Heo and Kim 2000; Kim 1999; Park 1999; Park
and Rhee 1998).
South Korea provides an almost textbook case of the market failure of “casi-
no capitalism” as the result of a government failure in regulating the financial sys-
tem. Two separate dynamics appear to be at work here. First, deregulation allowed
the chaebol to indulge in “casino capitalism” at a time when the relationship
between business and government had become somewhat strained. Ironically, the
very success of the state-led development project made the chaebol strong enough
to act independently. Second, democratization weakened the ability of the gov-
ernment to take any decisive action, both because it was more open to pressures
from strong interest groups (e.g., business and labor) and because the decline in
central control led to increasing turf wars among government agencies. For exam-
ple, throughout 1997 a financial reform bill was held up by political gridlock; and
business and labor have increasingly been able to thwart the reform efforts of the
Kim Dae Jung government over the past few years (Ha 2001; Heo 2001; Lau-
rence 1999; Park and Rhee 1998).
Taiwan
During the postwar era, Taiwan has gone through four periods of major struc-
tural transformation and industrial upgrading of its economy: (1) the 1950s when
the transformation away from an agricultural economy was consolidated; (2) the
early 1960s to the early 1970s when the “export boom” revolutionized the econ-
omy and set off significant social changes as well; (3) the mid-1970s to the mid-
1980s when substantial industrial upgrading occurred that was accompanied by
the emergence of a middle-class society and significant political liberalization;
and (4) the late 1980s and 1990s when democratization and the “Mainland revo-
lution” in economic orientation raised new challenges for the ROC (see Chan and
Clark 1992 for more detailed discussion of these transformations). At each stage,
significant economic, social, and political change occurred, which resulted in the
creation of new societal resources. These resources, in turn, formed the basis for
the upgrading of the island’s political economy in the next stage. The observance
of such a recurring pattern, however, does not mean that Taiwan has followed an
explicit grand design since the early 1950s. Rather, Taiwan’s development
appears to be much more open-ended, with the resources created at one stage
permitting more sophisticated responses when subsequent economic challenges
arose. Furthermore, the role of the state varied considerably in these four periods
of major economic change.
During the first stage, in the 1950s dramatic land reform and a decade of
import substitution enhanced the ROC’Sproduction capabilities in agriculture and
light industry; mass education created human capital; and the government sub-
stantially increased its economic leadership capability by bringing skilled tech-
34 Asian Affairs
nocrats into the top levels of the regime. Given the determinative role of govern-
ment policy in all these areas, Taiwan’s political economy clearly hewed closely
to the developmental state model. Despite the initial success of this transforma-
tion, import substitution soon reached its inevitable high point with the saturation
of the local market for light industrial goods, creating a new challenge for the
ROC (Galenson 1979; Ho 1978; Lin 1973).
In the 196Os, the resources accumulated during the first stage formed the foun-
dation for a new transformation to exporting light industrial products. The tech-
nocrats conceived and implemented the major policy changes that made this
transformation possible, but its success rested on the human capital that had been
developed in the work force and business community. This had the perhaps iron-
ic consequence of undercutting the developmentalstate by forcing Taiwan’s small
businesses to become highly entrepreneurial in the face of stiff international com-
petition (Galenson 1979; Gold 1986; Greenhalgh 1988; Haggard 1990; Ho 1978;
Kuo 1983; Lam and Clark 1994; Lin 1973; Wade 1990). Advocates of both neo-
classical economics (Linder 1986) and the developmental state (Amsden 1985;
Haggard 1990;Wade 1990;White 1988)could point to Taiwan during this era for
evidence confirming their clashing models.
Just as with import substitution, the success of Taiwan’s export-led strategy
contained the seeds of its own destruction in the sense that the island’s rising pros-
perity and wages began to price it out of the niche of low-cost manufactured prod-
ucts in the world economy. Economically, the ROC responded with two some-
what disparate transformations. First, there was a state-led push into heavy
industry (e.g., steel and petrochemicals); second, the small-scale business sector
began to upgrade its production techniques (Fields 1995; Gold 1986; Kuo 1995;
Noble 1998; Wade 1990; Wang 1992; Wu 1985). Considerable change occurred
in the political and social realms with the emergence of a strong middle class
(Cheng 1989, 1990a; Hsiao 1991) and a growing trend toward political liberal-
ization (Clark 1989; Copper 1988; Tien 1989). All these trends represented an
upgrading of Taiwan’s economic and political capabilities. Thus, despite a partial
re-emergence of the ROC’S developmental state, there was definitely a growing
balance of power and of resources between the state and the society.
The final structural transformation commenced in the mid- 1980s, and as in the
preceding ones, it was based upon the resource capabilities that had been built up
during the earlier stages. Economically, Taiwan emerged as a major player in the
global high-tech industry (e.g., ranking third in the world in semiconductor pro-
duction at the beginning of the new millennium) and, at the same time, saw a mas-
sive movement to offshore production in its traditional labor-intensiveindustries,
primarily to the PRC (Cheng 1990b; Chow 1997; Lardy 1994; Leng 1996;
Naughton 1997;Ranis 1992;Wang 1992;Y.S.Wu 1995).Unlike earlier eras, how-
ever, economic change was probably dwarfed by the transformation of the polity,
as the ROC went through a very successful democratic transition (Chao and Clark
1999; Chao and Myers 1998; Cheng 1989; Chu 1992; Copper 1997; Hood 1997;
Moody 1992; Rigger 1999; Tien 1989,1996; Tsang and Tien 1999; J.J. Wu 1995).
Taiwan, in sum, has undergone four major periods of “structural transforma-
tion” over the last five decades. The first two transformations (industry start-up
and export boom) were clearly dominated by the state, even though the latter was
based on marketization reforms. The vision for the transformation came from the
government, and the political power of an authoritarian regime was needed to over-
come the resistance of dominant social groups (the rural gentry to the first stage
and business and the military to the second stage), in line with Peter Evans’s (1985)
conceptualization of a “developmental state.” The nature of the next two econom-
ic transformations was much different. Government and business pursued separate
strands of economic upgrading during the third period. The final transformation
to the high-tech industry, furthermore, is remarkable because it represents the first
time there was intense and successful cooperation between Taiwan’s government
and business in economic development. If anything, business took the lead in artic-
ulating the vision for the high-tech transition, while government played a sub-
sidiary role of providing infrastructure (e.g., the science-based industrial park in
Hsinchu) and research and development support (Noble 1998; Wang 1992).
The complex relationship between the state-led and private-dominated sectors
of the economy can be seen in the financial sector, which evolved into a dual sys-
tem. On one hand, a state-led sector of state corporations, MNCs, and a few large
domestic business groups receives capital from the domestic banking system
(which was almost totally dominated by the government until quite recently) and
from the external resources of foreign corporations. On the other, a sector of small
firms has relied on more informal mechanisms of finance through the curb mar-
ket and other, innovative sources, such as collecting deposits from employees and
the general pubic, which are sufficient because most small enterprises are not very
capital intensive.
Superficially, this might appear to be an ideal marriage between the enlight-
ened guidance of a developmental state and the entrepreneurial vigor of the Chi-
nese business community. Yet, either half of the system probably would not have
worked very well without the other. The state financial institutions were a poor
source for venture capital and largely excluded the small businesses that con-
tributed so much to Taiwan’s economic success. Consequently, if the state had
monopolized finance as it did in Korea, Taiwan’s small businesses would have
been starved for capital, and the island’s export drive might well have withered
before bearing much fruit. However, the existence of the curb market allowed the
rapid development and restructuring of small businesses that were not too capi-
tal intensive. The danger of an unregulated curb market is an explosion of ram-
pant speculation (e.g., the “casino capitalism” of Taiwan’s stock market) and out-
right fraud, instead of productive investment. Here, the huge amount of funds
controlled by the state system was beneficial because transactions in the curb
36 Asian Affuirs
market were generally small. Thus, this dual system of finance had the fortuitous
effect of checking and balancing potential excesses. In short, “countervailing per-
versities” resulted in an effective financial system that contributed to Taiwan’s
movement toward prosperity (Clark 1997).
Taiwan’s political economy made it less vulnerable to the Asian financial cri-
sis and allowed the state to act decisively in the response to the challenge. While
Taiwan had moved to open up its financial system in the 1990s, the potential casi-
no capitalism of the curb market still remained fairly isolated, in part because of
the nature of the island’s industrial structure. In sharp contrast to the high corpo-
rate concentration in South Korea, Taiwan’s economic ownership is much more
dispersed with relatively small firms dominating (Clark 1997; Fields 1995; Tan
2001). It is much harder for these firms to connect to the “hot capital” in interna-
tional markets. Furthermore, this lack of concentrated power has limited the influ-
ence that business (or labor) has on the government. The state in Taiwan retains a
good deal of autonomy, even though it never approached the strength of the devel-
opmental state in South Korea (Cheng 2001; Chu 1994; Tan 2001). These factors
combined to make the Asian flu in Taiwan quite mild (see the data in table 3). The
challenge to the financial system was more muted than in South Korea, and it was
handled by the central bank with a moderate depreciation of the currency and the
reimposition of some controls on international capital flows (Tan 2001).
State and Market in Asian Dynamism: A More Nuanced View

The phenomenal performance of most of the economies in East and Southeast
Asia during the 1980s and most of the 1990s gave rise to the theory of the effi-
cacy of “strong and autonomous developmental states” based on the undeniable
role that government played in these economies. The Asian financial crisis of
1997-98 was taken by many (especially those who adhered to a laissez-faire phi-
losophy) as conclusively refuting the developmental state model. Yet a closer
examination of the crisis yields a much more nuanced set of conclusions. First,
although it is easy to find government policy failure, market failure contributed
quite significantly to the crisis as well. Second, even in terms of government fail-
ure, the demise or stillbirth of developmental states was probably more to blame
than the creation of competent bureaucracies. Finally, the nature of state struc-
tures varied greatly among the victims of the Asian flu, suggesting that more than
a simultaneous crisis of too much big government in the region was at work here.
Taken together, these conclusions suggest a need to rethink what we mean by
development and to move beyond the simplistic dichotomy between state and
market in devising development strategies.
REFERENCES
Alam, M .S. 1989. Governments and Markets in Economic Development Strategies: Lessons from
Korea, Taiwan, and Japan. New York: Praeger.
Amsden, A .H. 1985. The state and Taiwan’s economic development. Pages 78-104 in Bringing the
State Back In, edited by P.B. Evans, D. Rueschemeyer, and T. Skocpol. Cambridge: Cambridge
University Press.
-. 1989. Asia’s Next Giant: South Korea and Late Industrialization. New York: Oxford Uni-
versity Press.
Amdt, H. W., and H. Hill, eds. 1999. Southeast Asia’s Economic Crisis: Origins, Lessons, and a Way
Forward. New York St. Martin’s.
Balassa, B. 1981. The Newly Industrializing Countries in the World Economy. New York: Pergamon.
Balassa, B., G.M. Bueno, P. P. Kuczynski, and M. H. Simonsen. 1989. Toward Renewed Economic
Growth in Latin America. Washington, D.C.: Institute of International Economics.

Bates, R. H. 1981. Markets and States in Tropical Africa: The Political Basis ofAgricultura1 Policies.
Berkeley: University of California Press.
Bernard, M., and J. Ravenhill. 1995. Beyond flying geese and product cycles: Regionalization, hier-
archy, and the industrialization of East Asia. World Politics 47: 171-209.
Bhagwati, J. N. 1978. Foreign Trade Regimes and Economic Development: Anatomy and Conse-
quences of Exchange Control Regimes. Cambridge, Mass.: Ballinger.
. 1993. India in Transition: Freeing the Economy. Oxford: Clarendon.
Browne, E. C., and S. Kim. 2001. Japan: Prosperity, dominant party system, and delayed liberaliza-
tion. Pages 133-149 in The Political Economy of International Financial Crises: Interest Groups,
Ideologies, and Instirutions, edited by S . Horowitz and U. Heo. Lanham, Md.: Rowman and Lit-
tlefield.
Burkett, P., and M. Hart-Landsberg. 1998. East Asia and the crisis of development theory. Journal of
ContemporaryAsia 28: 435456.
Calder, K. 1993. Strategic Capitalism: Private Business and Public Purpose in Japanese Industrial
Finance. Princeton: Princeton University Press.
Campbell, R. W. 1991. The Socialist Economies in Transition: A Primer on Semi-Reformed Systems.
Bloomington: University of Indiana Press.
Chan, S. 1993. East Asian Dynamism: Growth, Ordec and Security in the Pacific Region. 2nd ed.
Boulder, Colo.: Westview.
Chan, S., and C. Clark. 1992. Flexibility, Foresight, and Fortuna in Taiwan’s Development: Navigat-
ing berween Scylla and Charybdis. London: Routledge.
Chan, S., C. Clark, and D. Lam, eds. 1998. Beyond the Developmental State: East Asia’s Political
Economies Reconsidered. London: Macmillan.
Chao, C. M., and C. Clark, eds. 1999. The ROC on the Threshold of the 2Is1Century: A Paradigm
Reexamined. Baltimore: School of Law, University of Maryland.
Chao, L., and R. H. Myers. 1998. The Firsr Chinese Democracy: Political Life in the Republic of China.
Baltimore: Johns Hopkins University Press.
Cheng, C. Y. 1990. Behind the Tiananmen Massacre: Social, Political. and Economic Ferment in China.
Boulder, Colo.: Westview.
Cheng, T.J. 1989. Democratizing the quasi-leninist regime in Taiwan. World Politics 41: 471-499.
-1990a. Is the dog barking? The middle class and democratic movements in the East Asian NICs.
Intemational Studies Notes 15: 10-16.
-. 1990b. Political regimes and development strategies. Pages 139-178 in Manufacturing Mira-
cles: Paths of Industrialization in Latin America andEastAsia, edited by G.Gereffi and D.L. Wyman.
Princeton: Princeton University Press.
2001. Limits of statecraft: Taiwan’s political economy under Lee Teng-hui. Paper presented at
thecdnference on Taiwan Under LeeTeng-hui: An Era of Democratization in Retrospect and Prospect,
at Wake Forest University, Winston-Salem, N.C.
Chow, P. C. Y. 1997. Complementarity and competitiveness of the economic relations across the Taiwan
Strait: Problems and prospects. Pages 173-189 in The Republic of China on Taiwan in the 1990s,
edited by W.L. Yang and D.A. Brown. New York Center for Asian Studies, St. John’s University.
Chu, Y.H. 1989. State structure and economic adjustment of the East Asian newly industrializing coun-
tries. International Organization 43: 647-672.
-. 1992. Crafiing Democracy in Taiwan. Taipei: Institute for International Policy Research.
-.1994. The realignment of state-business relations and regime transition in Taiwan. Pages
1 13-141 in Business and Government in Industrializing East and Southeast Asia, edited by A. Mac-
38 Asian Aflairs
Intyre. Sydney: Allen and Unwin.

Clark, C. 1989. Taiwan’s Development: Implications for Contending Political Economy Paradigms.
Westport, Conn.: Greenwood.
,1997. Taiwan’s financial system: Prosperity from countervailing perversities? Pages 116-165
in Global Perspecfiveson Economic Development: Government and Business Finance, edited by R.D.
Bingham and E.W. Hill. New Brunswick, N.J.: CUPR Press of Rutgers University.
Clark, C., and K. C. Roy. 1997. Comparing Development Patterns in Asia. Boulder, Colo.: Lynne Rien-
ner.
Cole, D. C., and B. F. Slade. 1999. The crisis and financial sector reform. Pages 107-1 18 in Southeasr
Asia’s Economic Crisis: Origins, Lessons, and a Way Forward, edited by H.W. Amdt and H. Hill.
New York St. Martin’s.
Copper, J. F. 1988. A Quiet Revolution: Political Development in the Republic of China. Washington,
D.C.: Ethics and Public Policy Center.
-. 1997. The Taiwan Political Miracle: Essays on Political Development, Elections and Foreign
Relations. New York: University Press of America.
Cumings, B. 1984.The origins and development of the Northeast Asia political economy: Industrial sec-
tors, product cycles, and political consequences. International OQanization 38: 1 4 0 .
Economist. 1999. May 1.
Evans, P. 1985. Transnational linkages and the economic role of the state: An analysis of developing and
industrialized nations in the post-World War II period. Pages 192-226 in Bringing the State Back In,
edited by P.B. Evans, D. Rueschemeyer, and T. Skocpol. Cambridge: Cambridge University Press.
-. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton: Princeton Uni-
versity Press.
Evans, P. B., D. Rueschemeyer, andT. Skocpol, eds. 1985. Bringing the State Back In. Cambridge: Cam-
bridge University Press.
Fallows, J. M. 1994. Looking at the Sun: The Rise of the New East Asian Economic and Political Sys-
tem. New York Pantheon.
Fields, K. J. 1995.Enterprise and the State in Korea and Taiwan. Ithaca, N.Y.: Cornell University Press.
Friedman, D. 1988. The Misunderstood Miracle: Industrial Development and Political Change in Japan.
Ithaca, N. Y.: Cornell University Press.
Friedman, M. and R. Friedman. 1980. Free to Choose. New York: Harcourt, Brace, and Jovanovich.
Friedman, T. L. 1999. The Lexus and the Olive Tree: Understanding Globalization.New York Random
House.
Galenson, W., ed. 1979. Economic Growth and Structural Change in Taiwan: The Poshvar Enperience
of the Republic of China. Ithaca, N.Y.: Cornell University Press.
Gereffi, G., and D. Wyman, eds. 1990. Manufacturing Miracles: Paths of Industrialization in Latin
America and East Asia. Princeton: Princeton University Press.
Gilder, G. 1984. The Spirit of Enterprise. New York Simon and Schuster.
Gold, T. B. 1986. State and Society in the Taiwan Miracle. Armonk, N.Y.: M.E. Sharpe.
Goldstein, M. 1998. The Asian Financial Crisis: Causes, Cures, and Systemic Implications. Washing-
ton, D.C.: Institute for International Economics.
Gomez, E. T., and K. S. Jomo. 1997. Malaysias Political Economy: Politics, Patronage, and Projits.
Cambridge: Cambridge University Press.
Gourevitch, P. A. 1986. Politics in Hard Times: Comparative Responses to International Economic
Crises. Ithaca, N.Y.: Cornell University Press.
Greenhalgh, S. 1988. Families and networks in Taiwan’s economic development. Pages 224-245 in Con-
tending Approaches to the Political Economy of Taiwan, edited by E.A. Winckler and S. Greenhalgh.
Armonk, N.Y.: M.E. Sharpe.
Ha, Y.C. 2001. South Korea in 2000: A summit and the search for a new institutional identity. Asian
Survey 41: 30-39.
Haggard, S. 1990. Pathways from the Periphery: The Politics of Growth in the Newly Industrializing
Countries. Ithaca, N.Y.: Cornell University Press.
Haggard, S., and R. R. Kaufman. 1995. The Political Economy of Democratic Transitions. Princeton:
Princeton University Press.
Haggard, S., and C. I. Moon. 1983.The South Korean state in the international economy: Liberal, depen-
dent, or mercantile? Pages 131-189 in The Antinomies of Interdependence: National Welfare and the
International Division of Labor, edited by J.G.Ruggie. New York Columbia University Press.
. 1990. Institutions and economic policy: Theory and a Korean case study. World Politics 42:
2 10-237.
Hahm, S. D., and L. C. Plein. 1997. After Development: The Transfonnation of the Korean Presidency
and Bureaucracy. Washington, D.C.: Georgetown University Press.
Harding, H. 1987. China’s Second Revolution: Reform After Mao. Washington, D.C.: The Brookings
Institution.
Hart, J. A. 1992. Rival Capitalists: International Competitiveness in the United States, Japan, and
Western Europe. Ithaca, N.Y.: Cornell University Press.
Hatcher, P. 1998. The Ministry: How Japan’s Most Powerful Institution Endangers World Markets.
Cambridge: Harvard Business School Press.
Heo, U. 2001. South Korea: Democratization, financial crisis, and the declineof the developmental state.
Pages 151-163 in The Political Economy of International Financial Crises: Interest Groups, Ideolo-
gies, and Institutions, edited by S. Horowitz and U. Heo. Lanham, Md.: Rowman and Littlefield.
Heo, U., and S. Kim. 2000. Financial crisis in South Korea: Failure of the government-led develop-
ment paradigm. Asian Survey 40: 492-507.
Ho, S. P. S. 1978. Economic Development in Taiwan, 1860-1970. New Haven: Yale University Press.
Hobday, M. 1995. Innovation in East Asia: The Challenge to Japan. Aldershot, United Kingdom:
Edward Elgar.
Hofheinz, R.Jr., and K. E. Calder. 1982. The Eastasia Edge. New York: Basic Books.
Hong, S. G.1992. Paths of glory: Semiconductor leapfrogging in Taiwan and South Korea. Pacific
FOCUS 7: 59-88.
Hood, S. J. 1997. The Kuomintang and ihe Democratization of Taiwan. Boulder, Colo.: Westview.
Horowitz, S., and Heo, U.,eds. 2001. The Political Economy of International Financial Crises: Inter-
est Groups, Ideologies, and Institutions. Lanham. Md.: Rowman and Littlefield.
Hsiao, H. H. M. 1991.The changing state-society relations in the ROC: Economic change, the trans-
formation of class structure, and the rise of social movements. Pages 127-140 in Two Societies in
Opposition: The Republic of China and the People’s Republic of China After Forty Years, edited
by R. H. Myers. Stanford: Hoover Institution Press.
Hutchcroft, P. 1994. Booty capitalism: Business-government relations in the Philippines. Pages
216-243 in Business and Government in Industrializing East and Southeast Asia, edited by A. Mac-
Intyre. Sydney: Allen and Unwin.
Johnson, C. A. 1982. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975.
Stanford Stanford University Press.
Jomo, K.S. 1997. Misunderstood Miracle: Industrial Policy and Economic Development in Thailand,
Malaysia and Indonesia. Boulder, Colo.: Westview.
Jones, L., and I. Sakong. 1980. Government, Business. and Entrepreneurship in Economic Develop-
ment: The Korean Case. Cambridge: Harvard University Press.
Kang, T. W. 1989. Is Korea the Next Japan? Understanding the Structure, Strategy, and Tactics of
America’s Next Competitor. New York Free Press.
Kim, Y. T. 1999. Neoliberalism and the decline of the developmental state. Journal of Contemporary
Asia 29: 441461.
Knight, M. 1998. Developing countries and the globalization of financial markets. World Develop-
ment 26: 1185-1200.
Kovacs, J. M., ed. 1994. Transition to Capitalism? The Communist Legacy in Eastern Europe. New
Brunswick, N.J.: Transaction Books.
Kuo, C. T. 1995. Global Competitiveness and Industrial Growth in Taiwan and the Philippines. Pitts-
burgh: University of Pittsburgh Press.
Kuo, S. W. Y. 1983. The Taiwan Economy in Transition. Boulder, Colo.: Westview.
Lam, D. K. K., and C. Clark. 1994. Beyond the developmental state: The cultural roots of “guerrilla
capitalism” in Taiwan. Governance 7: 412430.
Lam, D. K.K., and I. Lee. 1992. Guerrilla capitalism and the limits of statist theory. Pages 107-124
in The Evolving Pacific Basin in the Global Political Economy: Domestic and International Link-
ages, edited by C. Clark and S. Chan. Boulder, Colo.: Lynne Rienner.
Lardy, N. R. 1994. China in the World Economy. Washington, D.C.: Institute for International Eco-
nomics.
40 Asian Affairs
Lardy, N. R. 1998. China’s Unfinished Economic Revolution. Washington, D.C.: Brookings Institution.
Laurence, H. 1999. Financial system reform and the currency crisis in East Asia. Asian Survey 39:
348-373.
Leng, T.K. 1996. The Taiwan-China Connection: Democracy and Development Across the Taiwan
Straits. Boulder, Colo.: Westview.
Lin, C. Y. 1973. Industrialization in Taiwan, 19461972: Trade and Import Substitution Policies for
Developing Countries. New York: Praeger.
Linder, S. B. 1986. The Pacific Century: Economic and Political Consequences of Asian Pact@
Dynamism. Stanford: Stanford University Press.
MacIntyre, A., ed. 1994. Business and Government in Industrializing East and Southeast Asia. Syd-
ney: Allen and Unwin.
Makin, T. 1999. Preventing financial crises in East Asia. Asian Survey 39: 668-678.
Mardon, R. 1990. The state and effective control of foreign capital: The case of South Korea. World
Politics 43: 1 1 1-138.
Mardon, R., and W. K. Paik. 1992. The state, foreign investment, and sustaining industrial growth in
South Korea and Thailand. Pages 147-168 in The Evolving Pacific Basin in the Global Political
Economy: Domestic and International Linkages, edited by C. Clark and S. Chan. Boulder, Colo.:
Lynne Rienner.
Migdal, J. S. 1988. Strong Societies and Weak States: State-Society Relations and State Capabilities
in the Third World. Princeton: Princeton University Press.
Migdal, J. S., A. Kohli, and V. Shue, eds. 1994. Stare Power and Social Forces: Domination and Trans-
formation in the Third World. New York: Cambridge University Press.
Mirza, H. 1986. Multinationals and rhe Growth of the Singapore Economy. New York: St. Martin’s.
Moody, P. R. 1992. Political Change on Taiwan: A Study of Ruling Party Adaptability. New York
Praeger.
Moon, B. E. 1991. The Political Economy of Basic Human Needs. Ithaca, N.Y.: Cornell University Press.
Moon, B. E., and W. J. Dixon. 1992. Basic needs and growth-welfare trade-offs. International Studies
Quarterly 36: 191-212.
Moon, C. I. 1988. The demise of a developmentalist state? Neoconservative reforms and political con-
sequences in South Korea. Journal of Developing Societies 4: 67-84.
.1990. Beyond statism: Rethinking the political economy of growth in South Korea. Interna-
tional Studies Notes 15: 24-27.
Moon, C. I., and R. Prasad. 1994. Beyond the developmental state: Networks, politics, and institutions.
Governance 7: 360-386.
Nau, H. R. 1990. The Myth of America’s Decline: Leading the World Economy into the 1990s. New
York: Oxford University Press.
Naughton, B. 1995. Growing Out of the Plan: Chinese Economic Reform, 197&1993. New York:
Cambridge University Press.
Naughton, B., ed. 1997. The China Circle: Economics and Electronics in the PRC, Taiwan, and Hong
Kong. Washington, D.C.: Brookings Institution.
Noble, G.W. 1998. Collective Action in East Asia: How Ruling Parties Shape Industrial Policy. Itha-
ca, N.Y.: Cornell University Press.
Norton, J. J. 1998. The Korean financial crisis, reform and positive transformation: Is a second “Han
River Miracle” possible? Global Economic Review 27: 3-36.
Okimoto, D. I. 1989. Between MITI and the Market: Japanese Industrial Policy for High Technology.
Stanford: Stanford University Press.
Onis, Z. 1991. The logic of the developmentalist state.. Comparative Politics 24: 109-121.
Park, D., and C. Rhee. 1998. Currency crisis in Korea: How was it aggravated? Asian Development
Review 16: 149-180.
Park, T. W.1999. South Korea in 1998: Swallowing the bitter pills of restructuring. Asian Survey 39:
133-139.
Pei, M. 1994. From Reform to Revolution: The Demise of Communism in China and the Soviet Union.
Cambridge: Harvard University Press.
Peters, B. G.1991. European Politics Reconsidered. New York: Holmes and Meier.
Prestowitz, C. V. Jr. 1988. Trading Places: How We Allowed Japan to Take the Lead. New York: Basic
Books.
Pye, L. W. 1985. Asian Power and Politics: The Cultural Dimensions of Authority. Cambridge: Har-
vard University Press.
Rabushka, A. 1979. Hong Kong: A Study in Economic Freedom. Chicago: University of Chicago
Press.
Ranis, G., ed. 1992. Taiwan: Fmm Developing to Mature Economy. Boulder, Colo.: Westview.
Ravenhill, J., ed. 1995. The Political Economy of East Asia. 2 vols. Aldershot, United Kingdom:
Edward Elgar.
Rigger, S. 1999. Politics in Taiwan: Votingfor Democracy. London: Routledge.
Robison, R., and A. Rosser. 1998. Contesting reform: Indonesia’s new order and the IMF. World
Development 26: 1593-1609.

Rodan, G. 1989. The Political Economy of Singapore’s Industrialization: National, Stare and Inter-
national Capital. New York: St. Martin’s.
Rostow, W. W. 1960. The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge:
Cambridge University Press.
Rueschemeyer, D., and P. B. Evans. 1985. The state and economic transformation: Toward an analy-
sis of the conditions underlying effective intervention. Pages 44-77 in Bringing the State Back In,
edited by P. B. Evans, D. Rueschemeyer, and T. Skocpol. New York Cambridge University Press.
Shin, R. 1991. The role of industrial policy agents: A study of Korean intermediate organizations as
a policy network. Pacijc Focus 6: 49-64.
Skoggard, I. A. 1996. The Indigenous Dynamic in TaiwanS Postwar Development: The Religious and
Historical Roots of Entrepreneurship. Armonk, N.Y.: M.E. Sharpe.
Taiwan Statistical Data Book. 1999. Taipei: Council for Economic Planning and Development.
Tan,A. C. 2001. Taiwan: Sustained state autonomy and astep back from liberalization. Pages 165-176
in The Political Economy of International Financial Crises: Interest Gmups, Ideologies, and Insti-
tutions, edited by S. Horowitz and U. Heo. Lanham, Md.: Rowman and Littlefield.
Taylor, L. 1998. A lax public sector, destabilizing private sector: Origins of capital market crises.
Paper presented at the ShInternational Conference on Development and Future Studies, Central
Michigan University.
Tien, H. M. 1989. The Great Transformation: Political and Social Change in the Republic of China.
Stanford: Hoover Institution Press.
-, ed. 1996. Taiwan’s Electoral Politics and Democrutic Transition: Riding the Third Wave.
Armonk, N.Y.: M.E. Sharpe.
Tsang, S., and H. M. Tien, eds. 1999. Democratization in Taiwan: Implications for China. New York:
St. Martin’s.
Vogel, E. F. 1989. One Step Ahead in China: Guangdong Under Reform. Cambridge: Harvard Uni-
versity Press.
Wade, R. 1985. East Asian financial systems as a challenge to economics: Lessons from Taiwan. Cal-
ifornia Management Review 27: 106-127.
-.1990. Governing the Market: Economic Theory and the Role of Government in East Asian
Industrialization. Princeton: Princeton University Press.
-. 1998. The Asian debt-and-development crisis of 1997-? World Development 26: 1535-1553.
Wagner, H. 1998. “Invisible Hands”: Who paid the bill and who made a bargain in the Asian finan-
cial meltdown? Journal of Easr Asian Afiairs 12: 599-6 19.
Wang, N. T., ed. 1992. Taiwan’s Enterprises in Global Perspective. Armonk, N.Y.: M.E. Sharpe.
White, G., ed. 1988. Developmental States in East Asia. New York: St. Martin’s.
Wong, S. L. 1988. Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong. Hong Kong:
Oxford University Press.
Woo, J. E. 1991. Race to the Swif: State and Finance in Korean Industrialization. New York: Colum-
bia University Press.
Woodall, B. 1996. Japan Under Construction. Berkeley: University of California Press.
World Bank. 1993. The East Asian Miracle: Economic Gmwth and Public Policy. New York: Oxford
University Press.
. 1999. World Development Report, 1997/98. New York Oxford University Press.
Wu, J. J. 1995. Taiwan’s Democratization: Forces Behind the New Momentum. Hong Kong: Oxford
University Press.
Wu, Y.L. 1985. Becoming An Industrialized Nation: ROC’S Development on Taiwan. New York:
42 Asian Affairs
Praeger.
Wu,Y.S. 1995. Economic reform, cross-straits relations, and the politics of issue linkage. Pages
111-133 in Inherited Rivalry: Conflict Across the Taiwan Straits edited by T.J. Cheng, C. Huang,
and S.S.G . Wu. Boulder, Colo.: Lynne Rienner.

Bacaan 2

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bacaan 2

Uploaded by

Copyright:

Available Formats

This article was downloaded by: [Queensland University of Technology]

On: 13 October 2014, At: 07:44

Asian Affairs: An American

Implications of the Asian

To link to this article: http://dx.doi.org/10.1080/00927670209598874

PLEASE SCROLL DOWN FOR ARTICLE

The Cases of South Korea and Taiwan

CAL CLARK and CHANCHOON JUNG

Table 1. Indicators of Asian Nations’ Economic Dynamism, 1980-97

Japan 4.0 1.4 4.2 0.2

East Asian Tigers

World Avg. 2.9 2.5 2.8 -

industrialization, a theory that argues that “strong and autonomous developmen-

lenge. Three institutional characteristics-strength, autonomy, and developmen-

political corruption and “squeeze” on businesses within acceptable bounds); cre-

Critiques of the Developmental State Model

Table 2. State and Development in Asia

East Asian Big Capitalist Dragon

Taiwan Developmental state in heavy State power declining; major

The Asian Flu

Table 3. The Crash of the Asian Tigers

Percentage Change in Percentage Change in Percentage

Indonesia -44.4 4 . 6 8.0 5.0 -13.9

Sources: Economist (1999): 100; Goldstein (1998): 2-3.

Figure 1. Modeling the Asian Financial Crisis

Case Studies of South Korea and Taiwan

market” that by a weird coincidence produced “prosperity from countervailing

selected as “national champions” in a specific industry and to enforce “perfor-

State and Market in Asian Dynamism: A More Nuanced View

Growth in Latin America. Washington, D.C.: Institute of International Economics.

Intyre. Sydney: Allen and Unwin.

Development 26: 1593-1609.

You might also like