The Role of Government in East Asian Economic Development

Abstract

The role of government in East Asian economic development has been a contentious issue. Two competing views have shaped enquiries into the source of the rapid growth of the high-performing Asian economies and attempts to derive a general lesson for other developing economies: the market-friendly view, according to which government intervenes little in the market, and the developmental state view, in which it governs the market. What these views share in common is a conception of market and government as alternative mechanisms for resource allocation. They are distinct only in their judgement of the extent to which market failures have been, and ought to be, remedied by direct government intervention. This collection of essays suggests a breakthrough, third view: the market-enhancing view. Instead of viewing government and the market as mutually exclusive substitutes, it examines the capacity of government policy to facilitate or complement private sector co-ordination. The book starts from the premise that private sector institutions have important comparative advantages over government, in particular in their ability to process information available on site. At the same time, it recognizes that the capabilities of the private sector are more limited in developing economies. The market-enhancing view thus stresses the mechanisms whereby government policy is directed at improving the ability of the private sector to solve coordination problems and overcome other market imperfections. In presenting the market-enhancing view, the book recognizes the wide diversity of the roles of government across various East Asian economies including Japan, Korea, Hong Kong, Malaysia, and China, and its path-dependent and developmental stage nature.

China: an East Asian alternative to neoliberalism?

“…This began in the late 1980s when Johnson (1988) developed his previously-mentioned thesis of post-WWII Japanese development into a comparison of government-business relationships in Japan, South Korea and Taiwan. The literature was further developed through studies evaluating the state's multi-dimensional relationships with capital, labour, political ideology (primarily liberal democracy) and the global economy (Douglass, 1994;Aoki et al, 1997;Doner et al, 2005).…”

Government-business Relations:Summary of Theories and Construction of Prototype

“…Aoki's study focuses on three patterns, i.e., authoritative, interdependent relationship and regular interdependent relations, where these patterns are respectively modeled on several south Asian countries, Japan and America. [1] From the perspective of economy, an American scholar, John Zysman, divides the industrial changes into three patterns: state-leading, business-leading, and third partiesnegotiating. [2] Chinese scholars, Wei Jie and Zhao Junchao, from them, classify the world GBRs prior 1990s into three categories: traffic police-drivers (examples: Europe and America); brotherhood (example: East Asia); and father-son (example: Soviet Union).…”

Is “Good Governance” an Appropriate Model for Governance Reforms? The Relevance of East Asia for Developing Muslim Countries

“…This brings us to the Asian high-growth countries of the late twentieth century. Case studies of the governance conditions of these countries demonstrate very strongly that none of them conformed to the expectations of good governance theory [32][33].…”

“…In consequence, growth through the expansion of new productive capacity and systematically moving up the value chain is likely to be heavily constrained in most developing countries. Not surprisingly, successful developing countries demonstrate a variety of institutions and governance capabilities to address these major areas of market failure, together with institutional and political capacities to achieve sufficient inclusion to manage political stability during transitions that are bound to involve periods of conflict, strife and tension [32][33].…”