It’s tough getting off the Asian development ladder
South Korea is now facing acute problems, but the model has also been applied in one form or another in Japan, Taiwan, mainland China, Malaysia and Vietnam
In one version or another, country after country in Asia has pursued industrial policy very much like Park Chung-hee’s nation-building. It is a story that has been played out in Japan, Taiwan, mainland China, Malaysia and Vietnam.
Contrary to Western free market thinking, the close interplay of state and private enterprise – of market incentives and government direction – has been an effective way to pull large swathes of the population out of poverty in many Asian countries in a relatively short time.
When Park took power in 1961, Korea, with an annual income per person of US$82, was much poorer than the newly independent Ghana (US$179). By the time he was assassinated in 1979, income per capita exceeded US$1,000. Today, it’s above US$37,000, making it slightly richer than the average for European Union member states.
But picking national champions also means favouring their bosses. This inevitably generates close ties and interlocking connections and interests between the government and the private sector.
China’s economic reform would take these connections to a whole new level with state-owned enterprises. Like the chaebols, it’s an open secret that the red aristocratic families – the princelings – and powerful factions of the Chinese Communist Party divide up the pie and dominate different sectors such as telecommunications, financial services, mining and power supply.