Political Economy of Taiwan and S Korea – East Asian Model East Asian Model The so-called East Asian model of economic development was actually a model created by Japan in post-WWII, which has become one of the most interesting topics in the fields of political economy and comparative politics.

M ain characteristics of East Asian Model 1. Corporatist Developmental State 2. Export-led Economic Development Strategy 3. State policy and intervention

1. Corporatist Developmental State The state intrudes into detailed operations of individual enterprises with various measures intended to promote national industrial policies. For example, Japan: The Ministry of International Trade and Industry (MITI) and the Ministry of Finance Corporate conglomerates, such as Mitsui, Mitsubishi, Sumitomo, Fugo, Sanwa, Dai Ichi Kangyo Bank, Toyota, and Hitachi

Differences between free market economy and “corporate developmental state” Free Market EconomyCorporatist state economy 1. Free market economy emphasizes the efficient allocation of resources as the principal force for growth Corporate developmental state emphasizes the capital accumulation as the principal force for growth. 2. Free market economy emphasizes the market forces of supply and demand in a pluralist society as the supreme arbiter of economic decisions, and not government, in determining who are producers, and what and where to produce. Corporatist developmental state emphasizes the corporatist relations between the state and the private sector as the supreme arbiter of economic decisions to ensure individual economic decisions in line with a long-term national goal or interest.

Differences Free Market EconomyCorporatist state economy 3. Free market economy emphasizes that pluralist societies look favorably on inter-group conflict as a stimulus to healthy competition and innovativeness, and conflict is resolved through the open and fair competition in free marketplaces or at the ballot box. However, in strong corporatist states like Japan or Sweden, corporatist societies rely on inter-group negotiations to settle conflict, and each group would try to find accommodation with other groups in conflicting positions and look for compromises.

Differences Free Market EconomyCorporatist State Economy 4. Free market economy emphasizes the individual rights and freedom in pursuit of self-interest and wealth and looks at the individual freedom and choice as the supreme value in promoting a sustainable economic development and long- term economic prosperity. Corporatist developmental state, however, emphasizes the cooperative public-private relations as the basis for state’s market guidance and the favorable environment for a sustainable economic development, because only in such a corporatist relationship can the state have enough autonomy to influence the allocation of resources in line with a long-term national interest, which is often in conflict with short-term profit maximizing of private actors.

2. Export-led Economic Development Strategy Such a strategy seeks rapid industrialization initially by exporting relatively cheap products of labor intensive industries, such as textiles, and then by exporting higher value-added products of more capital-intensive industries, such as iron and steel, shipbuilding, and machinery, and finally by exporting more products of technology- intensive industries. Examples:

3. State policy and intervention The first is the practice of targeting the “strategic” sectors and firms for state special support starting with labor-intensive sectors; The second is a neo-mercantilist trade policy of maximizing exports and minimizing imports; The third is the state attempt to establish the parameters, rules, priorities, and infrastructures for the harmonious integration of the component parts of the society and the economy to achieve the common good of the whole society while each of the component parts is self-motivated and self-managing within state-initiated, organic structures.