Developmental States Essay

Submitted By Eraldz
Words: 3498
Pages: 14

Development Economics
Erald Zerba

During 1997 a particular event happened in Asia. During this year a number of Asian economies faced an economical collapse. This economic collapse attracted a lot of attention from the scholars and policy makers. People believed that this was the end of the Asia miracle. Countries like South Korea had a successful run, even though they faced a sudden decline. China and some late Southeast Asian countries delayed their decision to follow the same policy. Luckily, the crises did not last long. Some states, like Japan and Taiwan were able to pass the crises relatively unharmed. South Korea and China were able to bounce back quickly. While Southeast Asian countries, like Indonesia, Malaysia and Thailand, adopt to the crises and as a result their economic growth has taken a new trajectory. We can say that the only lasting victim of the crises in 1997 was the model of the East Asian developmental state.
We have to keep in mind that the Asian crises in 1997 could have been anticipated. Maybe not the exact date and place, but the idea of the postwar developmental state needed to adopt the changes in political, social and economical aspects should have been predicted. During this period the international political situation had changes as a result of the end of the Cold War. As a result the Asian countries were constantly forced to industrialize their economy, from a traditional manufacturing sector to a more high tech industrial sector. For most of the these Asian countries, the cheap labor was not anymore their comparative advantages, especially for counties like South Korea, Taiwan and Japan. And the key element is that the economic fundamentals were broken, as a result the stock market was out of control, there were real estate bubbles. As a result the difficulties to the postwar developmental state model preceded the crises of 1997.

The East Asian Model
The state was considered at one point to be a single actor who dealt with the markets, international pressures and the social forces. It was also conceived to be a number of institutions, which organized the behavior, strategies and the preferences of the different political members, whom might be inside or outside the state apparatus.
During that time the East Asian alternative of developmental state specifically had acquired enormous reputation as a design of a state led economical development. We should be aware that the main purpose of the developmental state is to intervene into the market, so that the transformation of industry can be accomplished faster and easier and this result in a higher economical growth. Even though this is called the East Asian Model, it is not an Asian policy. Scholars like Arnold Toynbee, Friedrich List and Alexander Gerschenkron showed evidences that nationalist governments applied policies which distorted the markets and as a result they had an economical development, in Europe. Even the United States followed a Republican policy, which imposed an open and free internal market and high tariffs. Even Bismarck's Germany followed a similar policy, which later was used as the basis of the Japanese developmental state model. Then what is the reason that East Asian developmental state attracted so much interest?
Firstly, each country in the Asian had an impressive economic growth rate. Japan had the highest rate, pursued by the East Asian Tigers, including Hong Kong, Singapore, Taiwan and South Korea. If we take the average rate of economic growth of the region, we notice that the rate is 10% per year, surpassing the developmental economies in Africa and Latin America. This region was very dynamic in the technological transfer and the flow of foreign investments. Another key element is the intellectual capabilities of the state. The policies implemented by the state, were neither socialist, nor they aided totally free markets.
The first general research about the Japan's postwar economic