The End of the Developmental State

Iain Pirie of the Department of Politics and International Studies at the University of Warwick in the UK has been a keen participant in debates about the developmental state in East Asia. In his new article, “Korea and Taiwan: The Crisis of Investment-Led Growth and the End of the Developmental State” (DOI: 10.1080/00472336.2017.1375136), he examines the rise of finance and the decline of the developmental state.

His abstract states:

A defining feature of the Northeast Asian developmental state was a focus on maximising investment and suppressing growth in consumption. While consistently high rates of investment were an integral part of the growth model, as the South Korean and Taiwanese economies matured, the viability of this model was undermined by the inability of these economies to generate sufficient opportunities for profitable investment. At the same time, the legacies of systems of labour control associated with the developmental state have impeded the development of stable wage-led growth regimes in both political economies. Instead, they have become reliant on an unstable combination of current account surpluses and consumer borrowing to sustain growth. The legacies of the developmental state continue to define many aspects of the political-economic landscape in Korea and Taiwan. However, changes in the growth regimes, the reorientation of the financial sectors from corporate to household lending, and the downgrading of industrial policy mean that it is no longer useful to define Korea or Taiwan as developmental states. Instead, contemporary Korea and Taiwan can be best understood as post-developmental states.

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