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State and
Development in
Korea and Taiwan
JAMES PETRAS
AND PO-KEUNG HUI
ntroduction It has become a cliche to describe the
rapid economic growth in the four Asian NICs as a
'miracle'. The annual GOP growth rates of Taiwan,
Hong Kong, South Korea and Singapore have been the
highest in the world over the last three decades. Average
annual growth in per capita GNP in these three decades
has been virtually double that of the industrial market
economies and the middle income oil exporters.' This
remarkable transformation has, not surprisingly, provoked
debate and revision among theorists of economic development.
The debate over development and underdevelopment has
evolved considerably over the past several years. In the
1950s it focused on socialist versus capitalist exchange
theories (Dobb, Baran Vs Rostow, Kuznets), in the 1960s
on dependency versus modernization, and in the 1970s and
1980s it has been dominated by 'laissez faire' neoliberal
versus state-centered polemics; discussion has now clearly
shifted onto the terrain of capitalist political economy. Both
the "free market" and "state-centered" approaches seek
validation by examining the most "successful" experiences
of capitalist development - the countries and city-states
of Southeast Asia, and in particular South Korea and Taiwan.
By focusing on the experiences of dynamic growth among
the capitalist countries of Southeast Asia, both the neo-
I
Studies in Political Economy 34, Spring 1991
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liberals and the state-centered theorists have made shortshrift of the predictions and assumptions of the dependency
school and their various off-shoots (world systems analysts,
de-linkers etc). This essay reviews these debates, and the
data mustered in support of the arguments, concluding with
a critique of the increasingly influential state-centered approach.
Our discussion begins with a summary critique of the
neoclassical and dependency schools in light of the East
Asian experience. This is followed by a brief discussion of
the "statist approach" and some empirical evidence about
the importance of the state in East Asian development. We
then discuss the function and role of the state in these
countries and conclude with a critical appraisal of statecentered approaches.
The Neoclassical Approach and Dependency Theory
Neoclassical economists argued that the high growth rates
of the Asian NICs were mainly due to the absence of regulation of the economic system. They claimed that state intervention was "largely absent''s and that the four NICs were
"relying extensively on private markets. "3 Free trade
regimes'[ and free-labour markets- were also mentioned as
crucial factors contributing to the miracle. The state was
relegated to a very limited role, providing infrastructure
and policies to keep the free market working smoothly.
The "free market explanations" have been under heavy
attack from numerous sources, particularly from specialists
in the development of Taiwan and Korea. State-centered
analysts, Gordon White and Robert Wade, for example,
reject the liberal analysis which attributed Latin American
stagnation to excess government intervention in the market
and growth in East Asia to non-intervention,
we find that state intervention in the latter [East Asia] has been
both stronger and more selective than in the former [Latin
America], not only at the national boundary but also in key
parts of domestic industry.e
Robert Wade also rejects the ahistorical premises of the
neoclassical theorists and their inadequate discussion of the
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Petras & HuilNICs and the State
effects of "non-liberal" aspects of policy on the success of
the NICs.? By comparing regional financial systems, he
reveals that statist bias favouring growth is significant.
Since 1960 the financial systems of Taiwan and South
Korea, with greater state regulation than Thailand and
Malaysia, have had better development records.f The
specialists on South Korea hold a similar view. In contrast
to the "free trade regime" argument, Bruce Cumings argues
that South Korea "has been a protectionist island in the
hegemonic free trade sea since the 1940s. "9 Richard
Luedde-Neurath provides even greater details to show that
South Korea was not a free market paradlse.l? The mathematical formulations of the free market ideologues do not
hold up to the facts and figures marshalled by the statecentered advocates.
This is also true in the case of dependency theory. Asian
dependency theorists applied the same approach as their
Latin American counterparts in analyzing the development
of the East Asian NICs. They purported to locate "major
external constraints on dependent development in the multinational corporation.t'U and claimed that dependence of
a country "on foreign capital... has resulted in economic
exploitation, foreign indebtedness and political repression."12 Hence, outwardlooking development strategies
were believed to undermine South Korean development by
creating a heavy foreign debt burden, mass poverty, and
political repression. Similarly, citing world systems theory,
Hammer argued that the dependency in Taiwan since the
1960s would have negative effects on Taiwanese development in the long run.13
In a much cited article, Bill Warren refuted the stagnationist thesis of the dependency school citing the NICs
in Asia as counter example to their predlctions.I'l Other
scholars, Haggard and Chen, for example, criticized the dependency tradition for failing to consider strategic political
considerations.
The dependency tradition locates the major external constraint
on dependent development in the multinational corporation. But
this notion is incomplete and misleading. No account of East
Asian growth is possible without attention being paid to the
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influence of empire and international security alliances; yet dependency theorists, no less than liberal economists, have been
oddly negligent of high politics. International political relationships and the transnational networks they produce, from British
and Japanese colonialism to the postwar system of American
alliances, have influenced choice of growth strategies.lS
Empirical evidence is readily available which contradicts
the arguments of the dependency theorists with respect to
the Asian NICs. Apart from Singapore, foreign direct investments in other Asian NICs contributed little to domestic
economic growth. (Table 2)16
TABLE 2. Foreign direct investment as a share of gross
domestic capital formation in the gang of four, selected
years (percentagesj'"
Hong Kong
1960
1965
1966
1968
1970
1972
1974
1976
1978
1980
a.
b.
c.
d.
average,
average,
average,
average,
4.3a
2.3b
1.2c
0.8d
Singapore
Taiwan
1.6
12.5
15.1
21.5
23.2
6.0
6.5
0.5
2.7
1.3
2.6
2.8
1.3
1.4
1.2
1.5
Korea
.6
.9
1.1
2.6
2.8
1.5
.7
.4
1971-73
1974-75
1976-77
1978-79
Export controls by the multinational corporations in the
Asian NICs (except Singapore) are also less pervasive than
in the Latin American countries.(Table 3)
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Petras & HutINICs and the State
TABLE 3. Share of foreign-invested firms' exports in total
NICs exports, selected years (percentages)"
Approximate share
South Korea
Taiwan
Singapore
Hong Kong
Brazil
Mexico
31.4
18.3
30
66.5
92.9
11
17.8
43
37
Year of estimate
1974
1978
1975
1970
1980
1974
1984
1969
1977
Moreover, it is also difficult for the traditional dependency
theorists to explain why South Korea, Taiwan, Singapore
and Hong Kong have become big foreign investors especially in Asia if they are so dependent on the imperialist
countries.w
The "State-centered" Approach Dissatisfied with the explanations provided by both the neoclassical economists and
the dependency theorists, specialists in Asian studies sought
a more promising explanation for the high growth rates by
focusing on the state. These writers are grouped under the
rubric "state-centered." Gordon White and Robert Wade provide a clear outline of the thesis:
the phenomenon of successful 'late development' - whether
'capitalist' (Germany, Russia. Japan. South Korea, Taiwan) or
socialist (the Soviet Union, China, North Korea) - should be
understood primarily in terms of Listian 'political economy'.
concretely as a process in which states have played a strategic
role in taming domestic and international market forces and
harnessing them to a national economic interest. ..
[And] ...successful 'late development' takes a form very different from that of the early industrialisers, notably the United
Kingdom: it is less 'spontaneous', more the subject of teleological determination. with the state playing the role of historical
animator.20
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Although not accepting in toto the position of White and
Wade, many specialists of East Asian development also
centre their analyses on the strong role of the state in organizing rapid growth. For example Lim argues, "[flew
Third World countries can match Korea in terms of the
central role the state plays in promoting development't.U
Bruce Cumings, in a major comparative essay concluded
that in the cases of South Korea, Japan and Taiwan, state
direction of development was critica1.22 Even in the citystate, Singapore, Haggard and Chen described strong state
intervention as crucial to the development process.23
The first direct indicator of the importance of the state
is the role of public enterprises in the economy. Among
the Four Tigers, Taiwan no doubt has had one of the biggest
public enterprise sectors in the world (excepting the exCommunist bloc) since the 1950s. Even in 1980,
the six biggest industrial public enterprises had sales equal to
the 50 biggest private industrial concerns. Of the largest ten
industrial concerns. seven are public enterprises; of the largest
50, 19 are public enterprises.z-
Public enterprises in South Korea, while not as significant
for economic growth as in Taiwan, are also major players.
Their share of GNP, has been increasing "significantly over
the seventies, particularly during the recession years of 1974
and 1975."25
Other direct indicators of state centered development include the fiscal and financial power of the state. The state's
share of revenue rose
from 21.6 percent of GDP in 1971 to 23.6 percent in 1982 in
Taiwan; from 13.8 percent in 1972 to 19.6 percent in 1981 in
South Korea; and from 22.1 percent in 1972 to 30.2 percent in
Singapore.ze
The government's expenditure as a share of GNP also increased from 20 percent in 1963 to 27 percent in 1980-81
in Taiwan.
Thus, while neoliberal policies prevailed in the economically stagnant countries of Latin American, the role of the
state in the domestic economy of the Bast Asian NICs was
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Petras & HuiINlCs and the State
increasing. If we turn to financial controls, the importance
of the state is even clearer. It is well known that nearly all
the banks in both Korea and Taiwan are strictly under the
control of the state.z7 The state not only controls credit
policy, its control is "extended even to low-level personnel
policy, hiring and firing, salary reviews and budgets."28
Moreover, price controls were very important in shaping
domestic market prices in South Korea.29 In addition, controls of international capital flow and international trade in
Taiwan and Korea are well documented and described by
Thomas B. Good and Richard Luedde-Neurath.F'
Role and Function of the State in South Korea and
Taiwan James O'Connor's thesis, that capitalist states increasingly socialize the cost of production for capital, does
not appear to hold true for the East Asian NICs. It is true
that the states in Taiwan and South Korea did socialize part
of the cost of production for capitalists by providing social
capital (especially during the 1970s), but their social expenditure is comparatively low.31 The poverty of the social
security system and the undeveloped pension system forces
citizens in these two countries to depend on family income
pooling and saving. That is why in Taiwan (and to a less
extent South Korea) there has been a relatively high
household saving rate.32 Hence the cost of reproduction of
labour is mainly a burden imposed on individual families
rather than on the state or the firm.
However, the states of both Taiwan and South Korea do
socialize the risk of production for enterprises. Firms in
the two countries depend heavily on borrowing rather than
on equity capitaI.33 High debt/equity ratios are the result
of government promoted industrialization. Especially in the
period of initial accumulation, the firms in these countries
lack the necessary internal capital (equity). In order to hasten the rate of industrialization, the state finances firms
through external capital - bank loans (both from domestic
saving and international loans), raising debt/equity ratios
to high levels. Moreover, the high debt/equity ratio creates
an "ever-present danger of financial instability," which will
also induce more government intervention in the economy
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(especially in countries like South Korea and Taiwan whose
economies are heavily trade-dependent and politically under
external threat) if the state wants stable economic growth.34
In short, we can say that in the late developing countries
like Korea and Taiwan, capitalists externalize their costs
and risks of production as the early capitalists did in the
now developed nations (e.g. the United States and the Great
Britain). The late developing state bears the risk of production while society shoulders most of the cost of production.
The state has been directly involved in promoting the
growth of the economy by taking responsibility for capital
accumulation. In Taiwan and South Korea, the initial accumulation of capital was largely accomplished through the
expropriation of peasant income by the state. In Taiwan,
[a]griculture provided a major source of forced fmancing in the
1950s ... Agricultural taxes took the form of land taxes and,
more importantly, of hidden taxes by means of compulsory
government purchases of rice at below-market prices, and by
means of the rice-fertilizer barter scheme.3S
In South Korea, during the initial accumulation period
- the 1950s - the government exploited peasants chiefly
by means of mandatory payment of rents and loans in grain
with occasional legislated state monopoly of grain purchase.36 At the same time, the Korean Government also allowed abundant imports of grain and other agriculture
products from the United States, causing domestic agricultural prices to fall below world levels.37 This of course
lowered the cost of living, hence wages, for urban workers
and, thus, allowed for more rapid capital accumulation.
The states in South Korea and Taiwan directly participate
in most areas of economic activity. In both countries, state
economic planning agencies (in Taiwan the Economic Planning Council, in South Korea, the Economic Planning Board
of Korea) guide the direction of investment, industrialization and foreign trade by means of credit policies, direct
subsidies, taxes, and exchange rate policies. In Korea, for
instance, the "state played a direct role in organizing production in upstream petrochemicals, steel, shipbuilding, and
heavy machinery, avoiding some of the duplicative invest186
Petras & HuilNICs and the State
ments."38 In addition, the Korean government also heavily
intervened in the direction of the foreign trade,39 State intervention is even more apparent in Taiwan where public
enterprises make a relatively large contribution to the
economy.
The state has also been a major force in the formation
and destruction of classes in both countries. In the early
development period of South Korea and Taiwan (i.e, the
1950s), the old landlord class was seriously weakened through
land reform. A new working class and a local capitalist
class, mainly driven out of the rural areas in Taiwan and
South Korea, was formed.40 Land reform in both countries
involved transfers from landlords to peasants. Payment to
the landlords came in the form of Japanese industrial and
commercial property bonds (at that time owned by the
statesj.t! Many of the old landlord class, displaced from
their rural property, became part of the capitalist class.42
Soon after the reforms, farmers were also pushed off their
land by the high taxes and high input prices (e.g. for fertilizer) charged by the state.
The role of the state in economic development was not
necessarily confined to direct economic planning or to the
control of economic institutions. The repression and discipline of the working class was also of crucial importance.43 Both the states in South Korea and Taiwan playa
direct role in controlling union organization to prevent
autonomous working class action.v' In order to sustain high
levels of accumulation through intensive exploitation, the
states built a huge army and police force. "In the 1950s
both regimes had absurdly swollen military machines about 600,000 soldiers in each army, ranking among the
highest military/civilian ratios in the world."45 The Secret
police repression under the Nationalist regime in Taiwan is
well known. In South Korea, the paramilitary riot police
force of 150,000,46 and the all pervasive Korean Central
Intelligence Agency (KCIA)47 constitute a highly cohesive
state apparatus which extends its control into every arena
of Korean economic and social life.
In attempting to account for their success in promoting
economic growth, proponents of the statist approach claim
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that the states of South Korea and Taiwan are more effective
than states elsewhere.
The reason why the financial controls do not produce the disasters that mainstream economics predicts is that the publicsector-in-general is more effective in these countries than in
many others: more effective in promoting a competitivelyoriented will to produce.sf
Wade argues that state efficiency is directly related to
the high exposure of the Taiwanese and South Korean
economies to the international market which,
has helped to discipline public sector interventions, especially
the behaviour of public enterprises which, though mostly not
export-oriented, are exposed to international competition indirectly through their sales to highly exposed downstream exporters.49
In addition to market exposure, Wade mentions two other
factors making for an efficient state. Party reform in Taiwan
(1950-52) allowed the Nationalist party to purge corrupt
factions and tighten party discipline. 50 Successful repression
of all potentially independent groups thus ensured that opposition forces could not consolidate against the party. As
a result of their political monopoly, the Taiwanese and South
Korean states possessed greater autonomy than did their
counterparts in Latin American countries. Thus, they were
positioned to define and implement national goals.51
White and Wade do not believe these experiences are
transferable to other regions. They argue, for example, that
some Latin American regimes may have wanted to do the
same as Taiwan and South Korea,
but they came to power in situations where many existing groups
already had a considerable autonomy from the state and a
capacity to exercise influence against it which could only be
put down by the exercise of great violence.52
They further criticize the neoliberal outlook of Latin
American governing classes because their
lu,l;k of concem for who controls production, foreigners or nationals, has resulted in much of the production for the lucrative
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Petras & Hul/NICs and the State
end of the domestic market being in the hands of multinational
corporations. The lack of concern for limiting the growth of
financial capital (financial enterprises are treated on a par with
industrial enterprises) has allowed a sizeable share of the
economy's investment resources to go into financial dealings
and speculation rather than into industrial production - into
making money, not things.53
In the end, White and Wade counsel the Latin American
ruling classes who seek to emulate the East Asian
"miracles," that they have much to learn "about the efficacy
of different forms and techniques of state action."54
White and Wade while mentioning global geopolitical
issues as factors accounting for the rapid development in
Taiwan and South Korea, subordinate them to the "state
efficacy theme." For White and Wade, external factors are
not very important in explaining the "miracles." Wade dismisses special external aid opportunities:
aid is not a sufficient explanation of Taiwan's success. Several
other countries have received similar or larger amounts of aid
per capita (Algeria and Chile, for example) but have not used
it as effectively.55
A Critique of the Statist Approach We agree with Hagen
Koo that though "this statist approach reveals important
dimensions of the East Asian development pattern, it tends
to overstress the independent role of the developmental
state."56 Other sociopolitical factors such as social classes,
global and regional geopolitical forces in the world
economic system should at least be paid the same attention.
Hence, a more comprehensive account of the development
of South Korea and Taiwan, would include class analysis,
and the world historical relationships along with an analysis
of the role of the state.
World politics and economy Although White and Wade identify some important differences between the states in Latin
America and East Asia, they neglect the different timing
of export-oriented development in the two areas. Taiwan
and South Korea (also Singapore and Hong Kong)
embalked on export-led industtiali'Lation ahead of most other
Third World countries, which joined the game only belatedly,
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in the 1970s .... In the 1960s and into the 1970s the world
capitalist economy was on the upswing. Core capitalists were
eager to invest, Euromoney was easy to borrow, and interest
rates were relatively low; there were fewer trade barriers against
Third World manufactures and little competition from other
labour-rich developing countries. Finally, the Vietnam War was
good for business in both countries.S7
Moreover, the nature of incorporation into the world
economy for South Korea and Taiwan also differed from
that of the Latin American countries. South Korea and
Taiwan were integrated into the world economy in the mid20th century for political reasons rather than economic ones
- as a result of US confrontation with China and its involvement in the Korean and Vietnamese revolutions. State
to state relations in the form of imperial state economic
transfers and imperial state trade openings and marketing
opportunities were much more important in "internationalizing" the economies of South Korea and Taiwan. Hence the
capacity of the multinational corporations in these two
countries has been much weaker than in Latin America.58
Unprecedented opportunities for world market trade and aid
were provided to Taiwan and South Korea not because of
economic reasons, but as a result of hot and cold war considerations.s? As Haggard and Chen note, "[i]mportant
transnational coalitions developed as both countries fell into
the U.S. security orbit."60 In order to protect capitalist
hegemony in Asia, the U.S. Government provided the two
countries with tremendous military and economic aid.61 The
aid helped these two countries to finance capital formation
and build infrastructure.s- Moreover, both countries were
able to keep real wages low by importing the US surplus.63
Most important, the enormous military aid,64 which supports
both countries' huge armies (for the sake of protecting Japan
and the rest of Asian capitalism and maintaining the world
economic order under the U.S. hegemony),65 also stimulated
the local economy.
The paradox of South Korea and Taiwan is the dual nature
of its state - 'weak' on the outside and 'strong' on the
inside, interventionist in the economy and submissive in
international politics. This paradox may, however, be re190
Petras & HullNICs and the State
solved in the near future as, on the one hand, an increasingly
affluent internal ruling class seeks its own independent
political expression against the state; and, on the other, as
the US economic position declines along with its capacity
to engage in global police roles. The tendency will be for
the US to close off local markets and decrease military outlays. The relationships between the regimes and the US will,
thus, probably change, challenging the thesis which banks
so heavily on the internal effectiveness of the state.
Class Nature of the State The statist approach does not provide a convincing sociological explanation that accounts for
the differential efficacy of the state in Taiwan and South
Korea, relative to other Third World countries. The statecentered analysts fail to describe the mechanisms whereby
the state harnesses corruption, bureaucratic centralism and
state planning to the dynamic accumulation process because
they ignore class agents. They treat the state as a 'black
box' structure, which can only be understood by examining
what goes into it and what comes out. But it is not easy
to discern whether or not the output they treat, i.e, the East
Asian 'miracle', is really generated by the 'black box' state,
or by the matrix of class relations in which the 'box' is
inserted.
A more egregious omission of the state-centered literature
is the failure to theorize the centrality of class relations
and class power in the accumulation process: the repressive
and exploitive relations which accompanied rapid growth
are only mentioned in passing, or underplayed through resort
to regime style euphemisms (i.e. Alice Amsden's benign
phrase "co-operative management" describing police-state
social relations captures this spirit succinctly). Exploitation
of labour both intensive and extensive was the cause and
consequence for active state intervention. The data on the
importance of class relations and exploitation to growth is
compelllng.ss In order to explore the mechanism of the state,
one must look at the state in a context of struggle among
different classes and sectors of classes, as well as examining
its tendencies to self-perpetuation.
While the state-centered approach has effectively debunked the assumptions of neoclassical and dependency
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schools in their respective attempts to explain the high
growth performances of Taiwan and South Korea, it has
itself fallen victim to its own over-simplifications. By ignoring the international variables - geopolitics, foreign aid,
neocolonial expenditures (US spending during the Vietnamese War) - and inadequately treating class relations,
the state-centered approach presents us with a very partial
and incomplete account of the determinants of high growth
in the two countries. The complex interaction between the
strong state and the larger political economic system has
to be taken into account. While the state-centered writers
can be credited for recognizing the 'efficient' use of surplus
value, one should keep in mind the long-term, large-scale
denial of popular rights and the harsh exploitation that undergirded the whole experience. Too facile a passing over
of the harsh class realities leads to the reification of
economic success. A theory of development focusing on
the efficacy of the corporatist state which fails to integrate
the social relations of production, is not likely to acknowledge the dark side of their state-centered arguments.
Notes
1.
2.
3.
4.
5.
6.
192
Richard E. Barrett and Soomi Chin, "Export-oriented Industrializing
States in the Capitalist World System: Similarities and Differences,"
in Frederic C. Deyo (ed.), The Political Economy of the New Asian
Industrialism (Ithaca: Cornell University Press, 1987) p. 26.
Edward Chen, Hyper-growth in Asian Economics: A Comparative
Study of Hong Kong, Japan, Korea, Singapore and Taiwan (London:
Macmillan, 1979) p. 83-4.
Milton and Rose Friedman, Free to Choose: a Personal Statement
(New York: Harcourt Brace Jovanovich, 1980) p, 57.
See Richard Luedde-Neurath,
"State Intervention and ExportOriented Development in South Korea," in G. White (ed.), Developmental States in East Asia (New York: St. Martin's Press, 1988) p.
69; and Robert Wade, "State Intervention in 'Outward-locking.'
Development: Neoclassical Theory and Taiwanese Practice," in idem
p, 31.
See Wade, "State Intervention in 'Outward-looking' Development ...,"
p.31.
Gordon White and Robert Wade, "Developmental States and Markets
in East Asia: an Introduction," in White (ed.), Developmental
States •••, pp.9-10.
Petras & Hul/NICs and tbe State
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Wade. "State Intervention in 'Outward-looking' Development ...•••
p.35.
Ibid. p. 123.
Bruce Cumings. "The Origins and Development of the Northeast
Asian Political Economy: Industrial Sectors Product Cycles. and
Political Consequences." International Organization. 38/1 (Winter
1984) p. 13.
See Luedde-Neurath,
"State Intervention and Export-Oriented
Development in South Korea."
Stephan Haggard and Tung-jen Chen. "State and Foreign Capital in
the East Asian NICs" in Frederic C. Deyo (ed.), The Political
Economy of the New Asian Industrialism (Ithaca: Cornell University
Press. 1987) p. 86.
See Hyun-Chin Lim. Dependent Development in Korea 1963-1979
(Seoul: National University Press. 1985) p, 14.
Heather Jo Hammer. "Comment on 'Dependency Theory and Taiwan:
Analysis of a Deviant Case'." American Journal of Sociology. 89/4
(January 1984) p, 935.
Bill Warren. "Imperialism and Capitalist Industrialization." New Left
Review. 81 (Sept/Oct 1973); See also Richard E. Barrett and Martin
K. Whyte. "Dependency Theory and Taiwan: Analysis of a Deviant
Case," American Journal of Sociology. 87/5 (March 1982) pp. 106489.
Haggard and Chen. "State and Foreign Capital in the East Asian
NICs," p.86.
See also the report from Clive Hamilton: "Nevertheless. the share
of TNCs in the manufactured exports of the Four has been relatively
small. with the notable exception of Singapore. For the early 1970s
the figures were for Hong Kong 10 percent. South Korea at least
15 percent. Taiwan at least 20 percent and Singapore nearly 70 percent. The fact that. except for Singapore, indigenous capital has
even greater proportion of total output. is essential to the argument
of this essay." Clive Hamilton, "Capitalist Industrialization in East
Asia's Four Little Tigers," Journal of Contemporary Asia. 13/1
(1983) p, 36.
Haggard and Chen. "State and Foreign Capital in the East Asian
NICs," p. 95.
Ibid. p, 93.
For example. "Hong Kong is the fourth largest foreign investor in
Malaysia, after Singapore, Japan and the United Kingdom (in 1979),"
and "investment of Hong Kong in Indonesia amounted to US $370
million in June 1980. Hong Kong is the second largest foreign investor in Indonesia. after Japan." Edward Chen. Hyper.growth in
Asian Economics ... pp. 483 and 484. See also Alice Amsden.
"Taiwan," World Development, 12/5-6 (1984) pp. 491-503. for the
case of Taiwan.
White and Wade. "Developmental States and Markets in East Asia:
an Introduction." p. 1.
Lim, Dependent Development in Korea 1963-1979. p. 28.
Cumings, "The Origins and Development of the Northeast Asian
Political Economy ... ," p. 11.
193
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23.
24.
25.
26.
27.
28.
29.
30.
31.
194
Haggard and Chen, "State and Foreign Capital in the East Asian
NICs," p. 85.
Wade, "State Intervention in 'Outward-looking' Development ... ," p.
47. "Short (1983) using two indicators - the percentage share of
public enterprise output in GDP at factor cost, and the percentage
share in gross fixed capital formation - estimates that, out of 72
developed and developing countries (excluding communist bloc and
oil-exporters), Taiwan is amongst the upper quintile according to
both indicators. In Asia, only India and Burma are of the same order
of magnitude or more (Korea's is a good deal smaller); in Latin
America, only Bolivia." pp, 46-7.
Haggard and Chen, "State and Foreign Capital in the East Asian
NICs," p. 126.
Barrett and Chin, "Export-oriented Industrializing States in the
Capitalist World System ...," p. 36.
For South Korea, see Chalmers Johnson, "Political Institutions and
Economic Performance: the Government-Business Relationship in
Japan, South Korea, and Taiwan," in Frederic C. Deyo, (ed.) The
Political Economy of the New Asian Industrialism (Ithaca: Cornell
University Press, 1987) p, 161; Cumings, "The Origins and Development of the Northeast Asian Political Economy ... ," p, 31; For Taiwan
see Robert Wade, "East Asian Financial Systems as a Challenge to
Economics: Lessons from Taiwan," California Management Review,
27/4 (Summer 1985) p, 115; and Luedde-Neurath, "State Intervention
and Export-Oriented Development in South Korea," p. 75. See also
Haggard and Chen, "State and Foreign Capital in the East Asian
NICs," p. 106 for the case of Singapore.
Luedde-Neurath, "State Intervention and Export-Oriented Development in South Korea," p. 75.
"[S]ince 1976 the number of items controlled has ranged from 46
to 193 in any on year." Luedde-Neurath, "State Intervention and
Export-Oriented Development in South Korea," pp. 76 and 77.
Thomas B. Gold, "Entrepreneurs, Multinationals, and the State," in
Edwin A. Winckler and Susan Greenhalgh (ed.), Contending Approaches to the Political Economy of Taiwan, (M.E. Sharpe, Inc.:
1988) pp. 201-202 for Taiwan; Luedde-Neurath, "State Intervention
and Export-Oriented Development in South Korea," pp. 77-89 for
South Korea.
"In 1973, expenditures on social insurance, public health, public
assistance, welfare, and veterans' relief represented 0.97 percent of
GNP in the ROK, 1.2 percent in Taiwan; this compares with 3 percent
in Malaysia and 5.3 percent in Japan." Cumings, "The Origins and
Development of the Northeast Asian Political Economy ...," p, 31.
Even in the 1980s, percentages of total central government expenditure for health, social security, and welfare in Taiwan (8.1% in
1986) and South Korea (8.1% in 1985) are far lower than the Latin
American NICs' (Brazil: 40.3% in 1985, Argentina: 40.1% and
Mexico: 13.4% in the early 1980s). Frederic C. Deyo (ed.), Beneath
the Miracle, (California: University of California Press, 1989) p.
95; See also Wade, "East Asian Financial Systems as a Challenge
to Bconomics ... ," \l. 109.
Petras & Hui/NICs and the State
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
Wade, "East Asian Financial
Systems as a Challenge
to
Economics ...," p. 109.
"Taiwan's finns are typically highly 'leveraged' in the sense that
they depend more on borrowing and less on equity capital. The Stock
Exchange, started in 1962, remains rudimentary as a source of
finance; by 1980 only 102 companies were listed. Again, the Government has been less than anxious to promote it." Wade, "East Asian
Financial Systems as a Challenge to Economics ...••• p. 112. South
Korea has a similar situation: "Around 80 percent. on the average.
of assets comes from loans from the banking system and other money
markets. including the curb market. [whereas] the Korean stock
market is just beginning to serve as a means of raising substantial
capital. The remaining 20 percent comes from internal (equity); this
compares with more than 50 percent internal financing among firms
in the United States." Hyung-chin Lim cited in Johnson. "Political
Institutions and Economic Perfonnance: the Government-Business
Relationship in Japan, South Korea, and Taiwan." pp. 147-8.
Wade. "East Asian Financial
Systems as a Challenge
to
Economics •..," pp, 117 and 118.
Ibid. p, 108.
Hamilton. "Capitalist Industrialization in East Asia's Four Little
Tigers," p. 51.
Mick Moore, "Agriculture in Taiwan and South Korea." in White,
Developmental States in East Asia, p, 145.
Haggard and Chen. "State and Foreign Capital in the East Asian
NICs." p. 126.
See Luedde-Neurath,
"State Intervention and Export-Oriented
Development in South Korea," pp. 77-81.
"In Korea, as grain imports rose and land was left untilled. between
1967 and 1972 the rural population fell from 16 million to 13 million
which with natural increase meant that about 7 million people left
the land for the cities. in the space of 5 years. The long-term effect
of land reform had been to drive both the richest and the poorest
from the villages. A similar though less dramatic process of spawning
a proletariat occurred in Taiwan." Hamilton, "Capitalist Industrialization in East Asia's Four Little Tigers," p. 52.
Ibid. p. 50.
Hence the local capitalists in these two countries were not indigenous
at the very beginning of the formation. Even today. the local bourgeois still relies on the support of the state. For example, ,••All
Korean businessmen, including the most powerful have been aware
of the need to stay on good terms with the Government to assure
continuing access to credit and to avoid harassment from the tax
officials.' So when the Yolsan conglomerate added to President Park's
difficulties by (reportedly) flirting with the main opposition leader
in 1979. the president used his ability to control debt to bankrupt
the company, taking several small banks with it (an admittedly extreme case)." Wade, "East Asian Financial Systems as a Challenge
to Economics ...," p. 122.
However, Amsden's "industrialization through learning" and "particiIllLtOry orgllniz,lltion" explanaticns seem to overlook. this aspect.
Her casual mention of the exploitive conditions of the workers in
195
Studies in Political Economy
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
196
South Korea falls far short of any effort to integrate this crucial
area into a general explanation of the industrialization process. Alice
H. Amsden. "Third World Industrialization: 'Global Fordism' or a
New Model?" New Left Review. 182 (July/August 1990).
Haggard and Chen. "State and Foreign Capital in the East Asian
NICs." pp. 91-2.
Cumings. "The Origins and Development of the Northeast Asian
Political Economy ...••• p. 26.
Ibid. p. 11.
The Korean central intelligence agency (KCIA). founded in 1961
with 3.000-man cadre. sharply expanded to 370.000 employees by
1964. Ibid. p. 10.
Wade. "East Asian Financial Systems as a Challenge to Economics ...•••
p.124.
Wade. "State Intervention in 'Outward-looking' Development ...•••p.
56.
Ibid. p.37.
Ibid. p. 38; and White and Wade. "Developmental States and Markets
in East Asia: an Introduction." p, 10.
White and Wade. "Developmental States and Markets in East Asia:
an Introduction." p. 10.
Ibid. p. 9.
Ibid. p. 25.
Wade. "State Intervention in 'Outward-looking' Development ...•••p.
37.
Hagen Koo, "The Interplay of State Social Class. and World System
in East Asian Development: the Cases of South Korea and Taiwan,"
in Frederic C. Deyo (ed.), The Political Economy of the New Asian
Industrialism (Ithaca: Cornell University Press. 1987) p. 165.
Ibid. p. 169.
Ibid. p. 175
Ibid. p, 172; and Jon Halliday. "Capitalism and Socialism in East
Asia." New Left Review 124 (Nov-Dec 1980) p. 7.
Haggard and Chen. "State and Foreign Capital in the East Asian
NICs." p. 103. See also Lim. Dependent Development in Korea 19631979: "From the U.S. point of view. Korea was regarded as an outpost
in checking the Communist expansion in Northeast Asia to protect
its East Asian allies, particularly Japan," (p, 61) and "[als far as
Korea is concerned. the basic policy direction of the U.S. revolved
far more around moral and security interests than around economic
ones. But the predominant American concern with stability and antiCommunism. has usually given priority to security interests rather
than moral interests in Korea:" p, 80.
"Since 1945 South Korea has received some $13 billion in American
military and economic aid. and Taiwan some $5.6 billion ($600 per
capita in the ROK. $425 per capita in Taiwan) .... The ROK's total
of nearly $6 billion in U.S. economic grants and loans. 1946-78.
compares with a total for all of Africa of $6.89 billion and for all
of Latin America of $14.8 billion; only India, with a population
seventeen times that of South Korea. received more ($9.6 billion).
U.S. military deliveries to Taiwan and the ROK in 1955-78 (that
Petras & HuilNICs and the State
62.
63.
64.
65.
66.
is. excluding the Korean War) totaled $9.05 billion. All of Latin
America and all of Africa received $3.2 billion; only Iran got more.
and most of that was pumped in after 1972 (the figure is $10.01
billion). Cumings. "The Origins and Development of the Northeast
Asian Political Economy ...•" p. 24.
For South Korea. the "contribution of foreign investment on domestic
capital formation was substantial. accounting for more than 30 percent in annual average between 1962 and 1979 (EPB. 1980b:14),"
Lim. Dependent Development in Korea 1963-1979. p. 64. In Taiwan,
"Samuel Ho estimates for Taiwan that foreign savings, much of which
was U.S. is. totaled 40 percent of gross domestic capital formation,"
Cumings, "The Origins and Development of the Northeast Asian
Political Economy ...," p. 24. "Taiwan's ... US aid. it should be said,
financed 59 percent of net domestic capital formation in agriculture
over 1951-65," Hamilton. "Capitalist Industrialization in East Asia's
Four Little Tigers." p. 51. See also ibid. p, 54; Haggard and Chen,
"State and Foreign Capital in the East Asian NICs." p, 87.
Cumings. "The Origins and Development of the Northeast Asian
Political Economy ...••• p. 34.
"[T]he coercive capacities of the South Korean state function as the
completion of the Japanese states: that is. without the ROK Army
Japan would have to reconsider its entire military posture (against
foreign and domestic pressures). The condition of post-war Japanese
democracy is in part the continued existence of a bureaucraticauthoritarian slate in Korea," Cumings. "The Origins and Development of the Northeast Asian Political Economy ...••• p, 14.
US Military Assistance between 1946 and 1975 totalled:ROK
$8,871.8 (millions); Taiwan $4,410; Latin America $2.562; Africa
$1,030.4. See Halliday. "Capitalism and Socialism in East Asia," p,
8.
For example. although Amsden correctly points out that real wages
in South Korea and Taiwan increased faster than in other late-industrializing countries [Amsden. "Third World Industrialization:
'Global Fordism' or a New Model?" p. 30]. "[i]t should be noted
that real wage increases started from a very low base and remain
low by world standards. As recently as 1980, ..., Latin American
industrial wages remained higher than those in Asia [the hourly
wages in Mexico and Brazil are U.S.$2.76 and $1.73 respectively
while in South Korea and Taiwan the figures are U.S.$l.10 and
$1.25 respectively]. In addition, at least through the 1970s, wage
increases generally lagged behind productivity increases. a reflection in part of the weak political status of Asian labour." Moreover.
"workers in East Asian light export industries. pace-setters for
economic growth through the mid-1970s, experienced greater job
insecurity and worse working conditions than their counterparts in
modem industrial sectors in Latin America ...• most important, relative income equality in Asia may be a consequence not so much of
equitable sharing in the fruits of economic growth as of very high
levels of labour extraction among low-income workers and families.
The average number of hours worked per week by Korean manufacturing employees is among the highest in the world ....tin Taiwan
and South Korea] employment expansion in export industries has
197
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Studies in Political Economy
involved a massive entry of secondary household earners, especially
young women from low-income families, into low-wage jobs." Deyo,
Beneath the Miracle, p. 197.
198