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Securing the Home Market: A New Approach to Korean Development
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Since the eclipse of neoliberalism in the late 1990s, the developing world’s industrial policies have begun to be rediscovered. To capture the essence of an industrial policy (in both the short and long run), it must be examined empirically, as in the decolonized world, through the eyes of the great “role models” that have used it intensively, one for manufacturing (the East Asian role model) and one for natural resources (the Organization of the Petroleum Exporting Countries/OPEC developmental role model). From the vantage point of market theory, industrial policies correct market failures. From the viewpoint of the decolonized generation’s role models, they “secure the home market” on the road toward overseas expansion; they are fundamentally nationalistic and vary by country, starting with the overhaul of foreign property rights (for example, the nationalization of foreign oil concessions in the Middle East, seizure of Japanese overseas investments in the Far East, “velvet privatization” in Brazil and appropriation of German properties in post-colonial Europe). The developmental state that an industrial policy serves may be authoritarian, discounting individualism—after decolonization, electoral politics were absent in every developing country except Costa Rica and India—but inherently nationalistic; practically, democracy must be assessed by the degree to which a population is satisfied to be living under a specific national state, not the degree to which specific leaders of that state are popularly elected.
This paper, one of the late Alice Amsden’s posthumous works, explains the role of industrial policy in the twentieth and twenty-first centuries, in particular in promoting nationally owned enterprises, securing home market, generating jobs and enhancing technologies and skills through the examination of various cases including the Republic of Korea, Brazil, India, China and Taiwan Province of China. Amsden argues that the origins of industrial policy in Asia and Middle East are associated with “getting the property rights wrong”, a basis of nationally owned enterprises, and elaborates on the conditions making the “wrong property rights” right. Having tangible skills at hand to manage newly nationalized properties is highlighted as a crucial condition. Given the weakness of the private sector in the decolonized world and developing countries, in particular the weakness of the medium-size enterprises with anywhere from 100 to 300 workers, the policies to promote them—most of which involves deviations from free market principles—are particularly crucial to make the “wrong property rights” right.
Alice Amsden was the Barton L. Weller Professor of Political Economics at MIT, in the Department of Urban Studies and Planning and Researcher at MIT Center for International Studies. She passed away in March 2012.