In pursuit of wealth and power: East Asian newly industrializing countries in the international political economy

This study examines the economic development of South Korea and Taiwan during the post-World War II period and assesses the applicability and fit to these two countries of the three major approaches to international political economy: economic liberalism, Marxism/radicalism, and neomercantilism. It focuses on four major controversial issues of international political economy: the effects of foreign aid, multinational investment, and international trade, and the role of the state in the development of Third World countries. It argues that the significant economic development that has occurred in South Korea and Taiwan has been, above all, state-led, and that the neomercantilist approach can best account for their developmental success in terms of the structural legacy of Japanese colonial rule, the beneficial effects of U.S. hegemony, and the strength and autonomy of the South Korean and Taiwanese states from private interests. It contends that South Korea and Taiwan demonstrate that the constraints of colonialism can be overcome, that national choices of developmental strategy do make a real difference, and that growth with equity is possible within outward-oriented, market-based economies. It concludes that the postwar experience of South Korea and Taiwan does offer a viable model of state-led development for other developing countries. The four elements of the model are: a political system in which the executive branch dominates the legislature, and employs an insulated economic bureaucracy; a chief economic agency that is cohesive, powerful, and internally democratic to oversee and coordinate the formulation and implementation of the economic plans; a financial system that is conducive to public control over the allocation of funds; and the commitment of the state to the diffusion of knowledge and the provision of real opportunities for everyone to succeed economically