An Overlooked East Asian Puzzle
For many years, the concept of Asian developmental states thrived because of its empirical robustness in explaining the East Asian economic miracle. Constructing a Weberian ideal type of interventionist state, the concept of developmental states presents an alternative model of economic development that is neither a socialist central-planning system nor a capitalist free-market economy (Woo-Cumings 1999: 1). The developmental state is ‘shorthand for the seamless web of political, bureaucratic and moneyed influences that structure economic life in capitalist Northeast Asia’ (Woo-Cumings 1999: 1), and the leadership of the developmental state is ‘a central characteristic of these late-late-late industrialisers’ (Clark and Chan 2004: 49). The primary characteristics of the state’s strategic influence in the economy include a development-oriented government, a competent economic bureaucracy for formulating and executing economic programmes, and the strong ability to insulate economic policy-making from societal pressure (Clark and Jung 2002). The intellectual discussion of the developmental state ‘reached something of a climax in the late 1980s and early 1990s’ (Stubbs 2009: 2). In 1993, the World Bank—the foremost international developmental agency—for the first time offered its endorsement regarding the concept of the developmental state by recognising that the state plays a role in sustaining high growth (World Bank 1993).
The late 1990s was a turning point for the study of Asian developmental states. Not only did the 1997 Asian financial crisis abruptly end the economic miracle of the region, but it also cast serious doubts on the state-led developmental model that most of the region had pursued, and alongside it those theoretical explanations. Although the region recovered quickly at the end of the 1990s, it seemed that ‘the most severe and lasting casualty of the 1997 crisis was the East Asian developmental state model itself’ (Wong 2004: 345). In the aftermath of the Asian financial crisis, the literature of the East Asian political economy took a sharp turn. On the one hand, some scholars argue that the state’s strategic role in the economy led to nothing but institutional corruption and economic inefficiency. As a result, terms like ‘crony capitalism’ and ‘money politics’ came to replace those such as the ‘East Asian Miracle’ (see Kang 2002a, b). On the other hand, it is believed that ‘the demise or stillbirth of developmental states was probably more to blame than the creation of competent bureaucracies’ (Clark and Jung 2002: 36). This belief led scholars to point to the rise of various social actors to explain the decline of the East Asian state’s capability to direct economic development.1 According to this argument, the principles of the East Asian developmental state manner quickly disappeared in the 1990s.
In regard to the rise and fall of the developmental state, this book addresses an overlooked puzzle by singling out the variations in the transformation of the three most typical Asian developmental states: South Korea, Singapore and Taiwan. These three states represent a particular type of developmental state characterised by an authoritarian political system.2 All three developmental states emerged out of the desire of authoritarian regimes for political survival in the post-war period (Castells 1992). Studies have shown that they have had very similar trajectories in terms of directing economic development programmes. Under the leadership of authoritarian governments, the three economies kicked off their rapid economic growth following a switch to an export-led growth model in the early 1960s, pushed for industrial upgrading in the late 1970s, and have embarked on a new post-industrial stage of leading knowledge-intensive, innovation-driven industrial development since the early 2000s (Wade 1990; Haggard 1990; Amsden 1989; Huff 1995; Wong 2011).3 However, a close examination of the transformation outcomes reveals that transformation processes were significantly varied in these countries. Since the early 1990s, while some analysts have attempted to describe the decline of the developmental state, other analysts have depicted its resilience.
From these divergent narratives arise a series of questions. Why did the South Korean developmental state already show signs of decline even before the country’s democratic transition in the late 1980s (E.-M. Kim 1997; Moon 1994)? What led to its rapid decline in the early 1990s, which subsequently resulted in the country’s economic disaster during the 1997 financial crisis (Minns 2001; Y.-T. Kim 1999; Heo and Tan 2003; Clark and Jung 2002)? Why did the Korean developmental state manage to achieve a temporary revival in the post-crisis period despite the continuation of the transformation of the developmental state (Cherry 2005; Y.-T. Kim 2005; Hundt 2014; S.-Y. Kim 2018)? Why did the Taiwanese developmental state managed to retain its leadership role in the economy in the 1990s and shelter the country from the financial crisis (Heo and Tan 2003; Tan 2001; Chu 1994; Clark and Jung 2002)? What has caused the rapid decline of the developmental state in the 2000s (Wu 2007; Tan 2008, 2009; W.-W. Chu 2011; Lee and Chu 2008; Thurbon 2020)? While these two states have ‘mutated into something different’ one after another (Y.-P. Chu 2006: 147), the Singaporean developmental state remains in ‘good health’ (Clark and Chan 2004: 51; Yeung 2005). Despite the belief that the transformation of the developmental state is inevitable, how did the Singaporean state manage to strengthen its position in society and embark on new economic projects (Pereira 2008)?
The experiences of the East Asian developmental state in recent years pose two empirical puzzles for East Asian specialists. The first puzzle concerns the variation in the transformation of the developmental state across the region. Why did some East Asian developmental states transform more rapidly than others despite similar levels of socioeconomic development? The second puzzle concerns the variation in the transformation of the developmental state in one single country. Within national borders, why did the transformation of the developmental state occur more noticeably during some historical periods than others despite a country’s consistent performance in socioeconomic transformation? The puzzling variations in the transformation of the three typical East Asian developmental states require an explanation. What lies behind these variations is the main topic that this book addresses.
My overarching argument is that the variations in the transformation of the developmental state have been produced by various levels of policy constraints imposed on the state as it emerges from a state-led developmental process. To account for variations in the levels of policy constraints, I turn to two variables, industrial structure and democratic transition, both of which are shaped by the strategic consideration of the ruling elites. Characterised by three types of indicators—domestic private capital concentration (DPCC), foreign direct investment (FDI) and state-owned enterprises (SOEs), the industrial structure of a country shapes the levels of policy constraints generated by business and labour interests. Playing an even more important role in transforming the developmental state, the democratic transition or the lack of democratic transition of a country affects the political context in which the state’s economic policy-making occurs.
Having addressed the main research puzzle of the book, I now turn to literature on the developmental state and its transformation. I will first contend that existing studies lack an explanation for the variations in the transformation of the developmental state. I then offer a theory to account for variations in the state’s transformation processes. Finally, I discuss how the empirical evidence presented in the book tests my theory.
Revisiting the Developmental State Model and Its Transformation
What Is the Developmental State Model?
Literature on the developmental state is plentiful. Overall, the main task of studies of the developmental state is to attribute the impressive economic performance of the region to the role of the state in directing overall economic development. Therefore, the thesis of most literature is that the economic development of East Asian countries has been a state-led development process. With consistent commitment to national economic development programmes, highly coherent and autonomous states have been the determining influence in economic decision-making and thus the major forces shaping capitalist development in those countries.
Broadly speaking, literature on the institutional and political profile of the developmental state consists of two important components, in two stages. Ever since Chalmers Johnson (1982) first coined the concept of capitalist developmental state to describe the Japanese state, this notion has been extended by other scholars to the states in Taiwan, Korea and Singapore, and, to some extent, Hong Kong (Wade 1990; Amsden 1989; Haggard 1990). Although individual studies vary in their degree of complexity, the core thesis stresses the state as a unified actor with a cohesive bureaucracy and relative autonomy from social classes (Johnson 1987; Amsden 1989; Wade 1990). In order to link the role of the state in the economy to the economic growth of a country, a key question that developmental state scholars address is how the state engineers the kind of rapid industrialisation that we have seen in East Asia. The answer is the powerful statist arrangements that ensure the strength of the state in directing economic development (Johnson 1982, 1987; Wade 1990, Amsden 1989). The literature’s heavy emphasis on the institutional strength of the state in the directing economic development is consistent with Alexander Gerschenkron’s (1962) notion that the aggressive intervention of the state in the market provides a necessary thrust to promote economic growth in order to overcome economic backwardness in late-developing countries.
Establishing the theoretical linkage between a country’s political institutions and economic performance, scholars have argued that the strength and comprehensiveness of the state’s influence in the economy, stemming from statist institutional arrangements, are essential for the state’s effective formulation and implementation of growth-promoting industrial policies. In the words of Ziya Onis (1991: 112), state influence in the form of industrial policy is supported by ‘specific political, institutional, and organisational arrangements pertaining to both the state apparatus and private business as well as their mutual interaction’. In short, early studies on the developmental state propose that the statist institutional arrangements seen in East Asia produce a kind of state autonomy that can insulate state policy-making from societal pressure in the development process. Such efforts hav...