ABSTRACT
The paper analyses the industrial performance of two East Asian (South
Korea and Taiwan) and three Latin American (Argentina, Brazil and Mexico)
newly industrializing countries. It argues that the better performance in East
Asia is not due simply t o differences in trade orientation or the degree of state
intervention, but rather to the effectiveness of intervention. This is explained
in terms of the relative autonomy of the state and the structuring of the state
apparatus in the two regions. The historically determined class structure and
the international context led to much greater state autonomy in East Asia than
in Latin America. The last part of the paper shows a number of ways in which
this greater relative autonomy has contributed to rapid industrial growth in
East Asia in comparison with Latin America.
EAST ASIA
There has been a spate of articles in the past few years comparing
the economic performance of the East Asian and Latin American
newly industrializing countries (NICs) (Ranis, 1985; Ranis and
Orrock, 1985; Sachs, 1985; Evans, 1987; Gereffi and Wyman, 1987;
Lin, 1988; Harberger, 1988; Fishlow, 1989; Whitehead, 1989). The
comparisons made are invariably unflattering to the Latin American
countries in terms of GDP growth, industrial output, manufactured
exports, industrial employment, income distribution, debt servicing
problems and inflation. On all these key economic indicators the
Latin American countries have been outperformed by the East
Asian NICs over the past three decades and particularly in the
1980s.
Developmenf and Chonge (SAGE, London, Newbury Park and New Delhi), Vol. 22
(1991), 197-231.
198
Rhys Jenkins
Most (but not all) of the above authors attribute the superior
economic performance of the East Asian NICs to differences in economic policies applied in the two regions. Specifically, it is held that
the East Asian NICs have adopted outward-oriented policies while
the Latin American countries have been wedded to inward-oriented
import substituting industrialization, and that the East Asian NICs
have been characterized by market-oriented policies whereas those
of Latin America have involved substantial distortions as a result
of extensive state intervention in economic activity. It is therefore
implied that Latin America should follow the example of the East
Asian NICs by liberalizing their economies and reducing the role of
the state.
There are two major problems with this view. First, it is based on
a particular interpretation of the East Asian NICs which attributes
their success almost entirely to good policies and the ability of the
people - scarcely at all to favourable circumstances and a good
start (Little, 1981:25). This view has been expressed even more
explicitly by Tsiang and Wu who claim that the experience of rapid
economic growth in Taiwan, Korea, Hong Kong and Singapore
during the past two or three decades was achieved not by economic
tricks, but by sensible policies based on sound neoclassical
principles (Tsiang and Wu, 1985: 329).
The second problem is the failure to provide an adequate explanation of why policies have differed between the two regions. The most
common explanation is in terms of the lack of natural resources and
population pressure in the East Asian NICs forcing these countries
to be outward oriented (Ranis, 1985; Lin, 1988). Other interpretations emphasize the greater political power of rural interests in
East Asia (Sachs, 1985) or more subjective factors such as a
weakness of will, a lack of spine and discipline, a drift into taking
the easy way out (Harberger, 1988: 177-8) in Latin America.
None of these offer a satisfactory interpretation of the political
economy of industrialization in the t w o regions.
The view that the secret of the East Asian NICs success involved
getting prices right and a minimal role for the state has been widely
challenged, particularly for Singapore, South Korea and Taiwan
(Amsden, 1985; Harris, 1987; Pack and Westphal, 1986; White,
1988). The only area in which free market ideology appears to
prevail in practice is in the labour market, and this can equally well
be interpreted as a reflection of an authoritarian industrialization
strategy in which the influence of trade unions is minimized.
199
Nor is it the case that the East Asian NICs (apart from Hong
Kong) have adopted general free trade. The contrast between
export-oriented and import substituting industrialization is in any
case an over-simplified dichotomy. Singapore, South Korea and
Taiwan all experienced periods of IS1 before launching their successful export drives. Moreover these countries while they promoted
exports also provided considerable protection to producers for the
domestic market (Wade, 1988; Luedde-Neurath, 1988). Indeed
some writers are careful to qualify their description of the trade
regime in these countries as one of free trade conditions for
exporters (Little, 1981: 42). The point has also been made that when
policies towards direct foreign investment are considered, it is South
Korea and Taiwan which appear inward-oriented in comparison
with Latin America (Fajnzylber, 1981).
There is now strong empirical support for the view that state
intervention has in fact been substantial in the East Asian NICs, and
that this has played a crucial role in their successful industrialization. It is not therefore state intervention per se that distinguishes
Latin America from East Asia. The argument of this paper is that
it is the effectiveness of state intervention which is the crucial
difference.
Effective industrial policies in East Asia are characterized by
four key features which contrast sharply to the situation in Latin
America: flexibility, selectivity, coherence and an emphasis on
promotion rather than regulation.
Flexibility is expressed in the willingness and ability to change
policies when these are not giving the desired results. In South Korea
in the early 1960s, when it was realized that plans to develop a local
car assembly industry were going to prove extremely expensive in
terms of foreign exchange, the project was abandoned (LueddeNeurath, 1986: 54). More recently some of the ambitious heavy
industrialization plans of the early 1980s were frozen in the face of
growing economic difficulties (Dornbusch and Park, 1987: 443).
Latin American industrialization on the other hand is full of
examples of government policies continuing to support industries
despite substantial foreign exchange costs and inefficiency.
The East Asian countries have operated policies which have been
highly selective, favouring particular industries and even particular
firms at different times (Wade, 1988: 53; Luedde-Neurath, 1988:
74). In some cases, this has involved the government dictating which
firms were to produce what, as has occurred in the South Korean
200
R hys Jenkins
20 1
R hys Jenkins
202
South Korea
Taiwan
Argentina
Brazil
Mexico
Exports
Production
31.4
28.0
15.7
22.2
17.5
16.1
12.5
1.8
7.1
5.2
The concept of the relative autonomy of the state has been much
debated (for a recent review see Anglade and Fortin, 1990). In this
context it is used to refer to the ability of the state to pursue policies
which are in the interest of capital as a whole, even when they
conflict with the interests of particular fractions of the dominant
class. This autonomy is relative in that the state cannot go as far as
acting against the long-run interests of the dominant class as a
whole.
It should be clear that there is no guarantee that the state will in
fact have the necessary relative autonomy. It should be seen rather
as a necessary condition for successful capital accumulation. Indeed
it is possible that the state, far from being able to resolve the competition between different capitals and class fractions, in fact
reproduces competition within the state apparatus itself. It has been
argued that such competition, leading to the establishment of large
numbers of public organizations each with its specific objectives and
criteria and with little prospect of collaborating among themselves
to achieve common goals is particularly characteristic of Third
World states (Evers, 1979: 169).
As noted above, the high degree of autonomy of the state in
the East Asian NICs has frequently been commented upon.
Government is seen as the senior partner in the public-private
relationship (Johnson, 1985) and Taiwan and South Korea (together
with Japan) have been described as strong states in the sense that
203
204
Rhys Jenkins
3. STATE STRUCTURES AND THE CAPACITY FOR
INTERVENTION
205
R hys Jenkins
In order to understand why the East Asian states have enjoyed such
a high degree of autonomy, in comparison with those of Latin
America, it is necessary to look at the specific history of class
formation and class struggle, as well as the effect of international
forces on development in each country.
(a) Landlords
One area in which the historical experience of the East Asian and
Latin American NICs led to the development of very different
207
South Korea
Taiwan
Argentina
Brazil
Mexico
Land
concent rat ion
(Gini coefficient)
Ownercultivators
(W labour force)
0.38
0.46
0.86
0.84
0.69
90
Productivity
growth 1960-73
(To per annum)
Land
Labour
33
2.7
4.4
2.8
I .3
21
1.1
90
48
5.3
4.2
I .3
2. I
2.8
Sources: Huntington (1968): Table 6.2; Lee (1979); Thorbecke (1979): Table 2.9;
Ban et al. (1980): Table 22; Elias (1985): Appendix 2.
R hys Jenkins
209
Rhys Jenkins
Table 3. Industrial Disputes, 1964-72 (Number of
Strikes and Thousands of Days Lost)
South Korea
Disputes Days
I964
1965
1966
I967
1968
1969
1970
1971
1972
7
12
I2
18
16
7
4
10
0
Taiwan
Disputes Days
19
41
I5
10
63
163
9
I1
0
5
5
20
2
31
9
57
2
I1
5
13
2
10
24
2
3
Argentina (BA)
Disputes Days
27
32
27
6
7
8
5
16
12
636
591
1004
3
16
I50
33
159
153
Mexico
Disputes Days
62
67
91
78
156
144
206
204
207
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
The low levels of organization and militancy in the two East Asian
21 1
Rhys Jenkins
212
1984: chap. 1). In Brazil too, the control of the state over the unions
weakened in the 1950s and the early 1960s and the trade unions were
increasingly able to use the labour system to their own advantage
(Humphrey, 1982: chap. 1).
The military regimes that came to power in Argentina and Brazil
in the mid-1960s attempted to restructure radically the relationship
between the state and the working class. In Brazil this was relatively
successful and strikes dropped off sharply (Erickson, 1977: 159).
Control over labour formed an important element in the Brazilian
Miracle of the late 1960s and early 1970s. In Argentina, however,
success was shortlived and collapsed with the revolt of the industrial
workers of Cordoba (the Cordobazo) in 1969.
In summary then, the state in South Korea and particularly in
Taiwan was able to ignore the interest of labour in formulating and
implementing economic policy. In Latin America, this could only be
said of the military regime in Brazil in the first ten or fifteen years
of its rule.
(d) International Factors
213
86
74
11
31
8
1
8
53
51
57
13
18
36
18
35
1952-67
(various years).
the 1970s when bank loans became the major source of external
finance for the Latin American NICs, contrary to popular belief, a
large proportion of these went to the private sector rather than to
the state (Roddick, 1988: 70-71). In East Asia, particularly in South
Korea, on the other hand, state control of the financial system
meant that foreign loans strengthened the state in relation to the
local bourgeoisie which needed government approval in order to
obtain low cost foreign loans (Evans, 1987: 216).
214
Rhys Jenkins
215
216
Rhys Jenkins
1950, the three Latin American NICs had already completed the
first stage of import substitution in non-durable consumer goods.
Further industrialization could follow one of four paths: industrial
deepening through import substitution in intermediate and capital
goods; import substitution in consumer durables; promotion of
industrial exports; or income redistribution and expansion of the
internal market (Kaufman, 1979). Faced with these choices, the
Latin American countries moved into a second stage of import
substitution, based primarily on consumer durable and intermediate
goods. The promotion of manufactured exports in Latin America
did not begin until the late 1960s.
Taiwan and South Korea only began the first stage of import
substitution in the 1950s. As this ran out of steam in the late 1950s
and early 1960s, a rapid shift took place to a much greater emphasis
on manufactured exports. In the early 1 9 7 0 ~Taiwan
~
and South
Korea undertook further import substitution in capital and
intermediate goods.
The interesting question is why and how were the East Asian
NICs able to switch industrial strategies relatively easily, while in
Latin America economic policy always tended to follow the line of
least resistance, broadening import substitution in the 1950s and
1960s and increasing foreign indebtedness in the 1970s? Although
empirical evidence is scanty, it seems likely that the weakness of the
industrial bourgeoisie and the consequent high level of autonomy of
the state in South Korea and Taiwan were major factors.
Although Taiwan shifted towards a greater emphasis on production for exports relatively early, in the late 1 9 5 0 ~there
~ was initial
opposition to such a change in policy, both inside and outside
the government (Myers, 1986: 62). The changes in exchange rate
policies were strongly opposed and some business leaders called for
increased protection and subsidies (Haggard, 1988: 277). Nevertheless, despite such opposition, the Kuomintang government was able
to impose the new policies.
In South Korea the change came later and was only initiated
following the military coup which installed President Park in 1961.
The ability of vested interests to oppose the new economic strategy
was severely weakened as many of those who had profited from
import substitution were gaoled or marched through the streets
carrying sandwich-boards with slogans such as I was a parasite on
the people (Cummings, 1984: 26). There was, however, opposition
217
218
Rhys Jenkins
219
220
Rhys Jenkins
(c) Control of Foreign Capital and Technology
22 1
23
21
21
48
42
output
19
< 25
29
40
35
Sources: Jenkins (1984): Table 2.2; Lahera (1985): Table 3; Koo (1985): Table 4.16;
Ranis and Schive (1985): Tables 2.6 and 2.12; ILO (1988): Table 9 and pp. 56-7;
CEPAL (1986): Table 48.
Rhys Jenkins
222
223
6. CONCLUSION
224
Rhys Jenkins
1979: chap. 7). High profit rates in favoured sectors were the result
not only of the states selective policies of protection and credit
allocation, but also of the tight control exercised over labour in both
countries.
Rapid industrial accumulation in the East Asian NICs reflected
not only the attractiveness of such investment, but was also, at least
in part, a consequence of the closing off of opportunities for nonproductive investment (ILO, 1988: 42). Land reform limited the
opportunities for large-scale investment in land, while public
ownership of the banking system meant that financial investment
was less attractive. Capital flight too appears to have been less of
a problem in East Asia than in Latin America (World Bank,
1985: Table 4.4). In the case of South Korea under the Park government, The repulsion of capital from its old commercial circuit . . .
due to the elimination of opportunities to make big profits simply
through trade and access to foreign exchange (C. Hamilton, 1984:
42) has also been commented upon.
The key to the superior industrial performance of the East Asian
NICs does not lie in the general superiority of export-oriented
industrialization strategies over import substitution, or of marketoriented policies over state intervention as some writers have
suggested. It is rather the ability of the state to direct the accumulation process in the direction which is required by capitalist
development at particular points in time which is crucial. This in
turn has to be located in the existence of a developmental state with
a high degree of relative autonomy from local classes and class
fractions. This paper has highlighted the ways in which specific
historical experience and the international context gave rise to
such states in East Asia but not in Latin America in the postwar
period.
In conclusion it is worth noting that the degree of relative
autonomy of the state is neither invariant within regions nor over
time. The degree of state autonomy appears to have been higher in
Taiwan than in South Korea, and the growing importance of the
chaebols in Korea and the predominance of small-scale industry in
Taiwan have served to intensify this difference. The difference in
industrial structure, and the greater level of mobilization of workers
in South Korea before 1960, also contributed to greater pressure on
the state from below than in Taiwan. Developments in South Korea
in the 1980s suggest that the very success of the state in promoting
industrialization is reducing its relative autonomy.
225
NOTES
Earlier versions of this paper were presented to the 46th International Congress of
Americanists, Amsterdam, 1988 and the Annual Conference of the Society for Latin
American Studies, Oxford, 1990.
I. This is not intended to be an exhaustive discussion of all the factors which have
contributed to the successful industrial performance of the East Asian NICs.
2. In the case of Taiwan, it is estimated that the net capital outflow from
agriculture increased at a rate of 10 per cent per annum during the 1950s (Amsden,
1985: 85).
REFERENCES
Adler, E. (1987) The Power of Ideology: The Quest for Technological Autonomy in
Argentina and Brazil. Berkeley, CA: University of California Press.
Amsden, A. (1985) The State and Taiwans Economic Development, in P. Evans,
D. Rueschemeyer and T. Skocpol (eds) Bringing the State Back I n , pp. 78-106.
Cambridge: Cambridge University Press.
Anglade, C. and Fortin, C. (1987) The Role of the State in Latin Americas Strategic
Options, CEPAL Review 31: 21 1-34.
Anglade. C. and Fortin, C. (1990) Accumulation, Adjustment and the Autonomy
of the State in Latin America, in C. Anglade and C. Fortin (eds) The Slate
and Capital Accumulation in Latin America, Vol. 2, pp. 21 1-332. London:
Macmillan.
Balassa, B. (1978) Export Incentives and Export Performance in Developing
Countries: a Comparative Analysis, Weltwirtschuftliches Archiv 1 l4( I): 2461.
Balassa. B. (1979) Incentive Policies in Brazil, World Development 7: 1023-42.
Balassa. B., Bueno, G., Kuczynski, P. and Simonsen, M. (1986) Toward Renewed
226
Rhys Jenkins
Economic Growth in Latin America. Washington, DC: Institute for International Economics.
Ban, H.S., Moon, P.Y. and Perkins, D. (1980)The Republic of Korea, 1945-75:
Rural Development. Cambridge, MA: Harvard University Press.
Barraclough, S. and Domike, A. (1970)Agrarian Structure in Seven Latin American
Countries, in R. Stavenhagen (ed.) Agrarian Problems and Peasant Movements
in Latin America, pp. 41-94. New York: Anchor Books.
Bennett, D. and Sharpe, K. (1985) Transnational Corporations versus the Sfate.
Princeton, NJ: Pridceton University Press.
Cammack, P. (1990)States and Markets in Latin America, mimeo.
CEPAL (1986)Las empresas transnacionales en la Argentina, Estudios e lnformes
de la CEPAL 56. Santiago: Naciones Unidas.
Coldrick, A.P. and Jones, P. (1979)International Directory of the Trade Union
Movement. New York: Facts on File Inc.
Collier, D. (1979)Overview of the Bureaucratic-Authoritarian Model, in D. Collier
(ed.) The New Authoritarianism in Latin America, pp. 19-32. Princeton. NJ:
Princeton University Press.
Cummings, B. (1984)TheOrigins and Development of the Northeast Asian Political
Economy: Industrial Sectors, Product Cycles and Political Consequences,
International Orgarrization 38( I):1-40.
Datta-Chaudhuri. M.K. (1981)Industrialization and Foreign Trade: The Development Experiences of South Korea and the Philippines, in E. Lee (ed.) Export-led
Industrialization and Development, pp. 47-17. Geneva: ILO.
Deyo. F. (1986)Industrialization and the Structuring of Asian Labor Movements:
the Gang of Four, in M. Hanagan and C. Stephenson (eds) Confrontafion,
Class Consciousness and the Labour Process, pp. 161-98. Westport, CT:
Greenwood Press.
Deyo, F. (1987) State and Labor: Modes of Political Exclusion in East Asian
Development, in F. Deyo (ed.) The Political Economy of the New Asian
Industrialism. pp. 182-202. Ithaca. NY: Cornell University Press.
Deyo, F. (1989)Labor and Development Policy in East Asia, The Annals of the
American Academy of Political and Social Science 505 (Sept): 152-61.
Dornbusch. R. and Park, Y. (1987)Korean Growth Policy, Erookings Papers on
Economic Activity 2:389-453.
Elias, V. (1985)Government Expenditures on Agriculture and Agricultural Growth
in Latin America. Washington, DC: International Food Policy Research
Institute, Research Report 50.
Enos. J. and Park, W. (1988)The Adoption and Diffusion of Imported Technology:
The Case of Korea. London: Croorn Helm.
Erickson. K. (1977)The Brazilian Corporative State and Working Class Politics.
Berkeley, CA: University of California Press.
Evans, P. (1979)Dependent Development. Princeton, NJ: Princeton University
Press.
Evans, P. (1987)Class, State and Dependence in East Asia: Lessons for Latin
Americanists, in F. Deyo (ed.) The Political Economy ojthe New Asian Industrialism, pp. 203-26. Ithaca, NY: Cornell University Press.
Evans, P. and Gereffi, G. (1979)Foreign Investment and Dependent Development,
in S. Hewlett and R. Weinert (eds) Braziland Mexico: Patterns in Late Development, pp. I 1 1-68. Philadelphia: Institute for the Study of Human Issues.
227
228
Rhys Jenkins
Huntington, S. (1968) Political Order in Changing Societies. New Haven, CT: Yale
University Press.
ILO Yearbook of Labour Statistics (various years). Geneva: ILO.
ILO (1985) World Labour Report, 2. Geneva: ILO.
ILO (1988) Bridging the Gap: Four Newly Industrializing Countries and the
Changing International Division of Labour. Geneva: ILO.
de Janvry, A. (1981) The Agrarian Question and Reformism in Latin America.
Baltimore, MD: The Johns Hopkins University Press.
Jenkins, R.O. (1984) Transnational Corporations and Industrial Transformation in
Latin America. London: Macmillan.
Johnson, C. (1985) Political Institutions and Economic Performance: The
Government-Business Relationship in Japan, South Korea and Taiwan, in
R. Scalapino, S. Sato and J. Wanandi (eds) Asian Economic Development Present and Future, pp. 63-89. Berkeley, CA: Institute of East Asian Studies,
University of California.
Kaufman. R. (1977) Mexico and Latin American Authoritarianism, in J. Reyna and
R. Weinert (eds) Authoritarianism in Mexico, pp. 193-232. Philadelphia:
Institute for the Study of Human Issues.
Kaufman, R. (1979) Industrial Change and Authoritarian Rule in Latin America: A
Concrete Review of the Bureaucratic-Authoritarian Model, in D. Collier (ed.)
The New Authoritarianism in Latin America, pp. 165-253. Princeton, NJ:
Princeton University Press.
King, T. (1970) Mexico: Industrialization and Trade Policies since 1940. Oxford:
Oxford University Press.
Koo, B. (1985) The Role of Direct Foreign Investment in Koreas Recent Economic
Growth, in W. Galenson (ed.) Foreign Trade and Investment: Economic
Development in the Newly Industrializing Asian Countries, pp. 176-216.
Madison, WI: The University of Wisconsin Press.
Koo, H. (1987)The Interplay of State, Social Class and World System in East Asian
Development: the Cases of South Korea and Taiwan, in F. Deyo (ed.) The
Political Economy of the New Asian Industrialism, pp. 165-81. Ithaca, NY:
Cornell University Press.
Krueger. A. (1978) Foreign Trade Regimes and Economic Development: Liberalization Attempts and Consequences. Cambridge, MA: Ballinger Press.
Kuo, W.Y. and Fei, J. (1985) Causes and Roles of Export Expansion in the Republic
of China, in W. Galenson (ed.) Foreign Trade and Investment: Economic
Development in the Newly Industrializing Asian Countries, pp. 45-84. Madison,
WI: The University of Wisconsin Press.
Lahera, E. (1985)The Transnational Corporation and Latin Americas International
Trade, CEPAL Review No. 25: 45-65.
Lee, E. (1979) Egalitarian Peasant Farming and Rural Development: The Case of
South Korea, World Development 7(4/5): 493-517.
Liang, K. and Liang, C. (1988) Development Policy Formation and Future Policy
Priorities in the Republic of China, Economic Development and Cultural
Change, 36(3) Supplement: S67-SIOI.
Lin, C. (1988) East Asia and Latin America as Contrasting Models, Economic
Development and Cultural Change, 36(3) Supplement: S153-SI97.
Little, 1. (1981) The Experience and Causes of Rapid Labour-Intensive Development
in Korea, Taiwan Province, Hong Kong and Singapore and the Possibilities of
230
Rhys Jenkins
23 1
White, G. and Wade, R. (1988) Developmental States and Markets in East Asia: an
Introduction, in G. White (ed.) Developmental States in East Asia, pp. 1-29.
London: Macrnillan.
Whitehead, L. (1989) Tigers in Latin America?, The Annals of the American
Academy of Political and Social Sciences 505 (Sept): 142-51.
World Bank (1985) World Development Report 1985. Washington: The World
Bank.
World Bank (1988) World Development Report 1988. Washington: The World
Bank.
Wynia, G. (1978) Argentina in the Postwar Era. Albuquerque, NM: University of
New Mexico Press.
Wynia, G. (1988) Obstacles to Trade Liberalization in Rent-seeking Societies: What
Argentina and Australia Have in Common, paper presented to the 46th International Congress of Americanists, Amsterdam.