Asia's Next Giant: South Korea and Late Industrialization (review)

Book Reviews Asia's Next Giant: South Korea and Late Industrialization. By Alice H. Amsden. New York and Oxford: Oxford University Press, 1989. Pp. vii, 379. In the last decade, Korea has become a testing ground for a number of social scientific controversies. None has had wider intellectual, political , and policy ramifications than the debate over the role that state and market have played—and should play—in the process of economic development. The dominant paradigm derives from neo-classical economics. With a few naive exceptions, this view does not contend that Korea's economic policies have been laissez-faire; no one seriously believes that Korea resembles Hong Kong. The claim is that compared to other developingcountries, Korea's economic strategy emphasized stable fiscal policy, was favorable to business, and allowed relative prices to broadly reflect scarcities. Above all, trade and exchange rate policies were designed to allow, if not force, firms to exploit comparative advantage via exports that were intensive in low-cost labor. The neoclassical picture is not a "static" one, as is sometimes claimed. As the mix of national endowments changed—as the country accumulated skills, capital, and technological capabilities—it was to be expected that the pattern ofoutput and exports would shift toward more skill-, capital-, and technology-intensive goods. If these arguments seem simple and straightforward, their implications are profound, not only for an understanding of Korea, but for the export of the Korean model to other developing countries. If 181 182Journal ofKorean Studies true, Korea's growth can be explained as the result of investor responses to market forces. These, in turn, were brought into play by liberalizing reforms that were launched under the Chang Myon government , carried forward by the military, and consolidated and extended under the nominally "civilian" government of Park Chung Hee in 1964 and 1965. Subsequently, there were important changes within the export-oriented growth model, but the central commitment to an outward-oriented strategy was never abandoned, even during the heavy industry drive of the late 1970s. For a number of years, a group of dissident economists, political scientists, and sociologists have been chipping away at this model. One line of attack is to challenge the descriptive accuracy of the neoclassical approach by cataloging the variety of government interventions that in fact occurred. A second line of attack is to probe the institutional and political underpinnings of Korean growth, a complex and often sordid history that economists tend to overlook. Alice Amsden has chosen a third and more difficult task: chai- . lenging the neo-classical edifice head on through the construction of an alternative theoretical framework for understanding late development . In doing so, she has given us the most provocative singlevolume account of Korea's economic growth, a book that will spark debate and new research for years to come. The book is not easily summarized, however. It is stylistically sprawling, addressing a wide variety of topics through an eclectic combination of theoretical discourse and polemic, historical example, and detailed case study. The argument combines a number ofdistinct levels of analysis, from the political system, to the macroeconomy, to the nature of state intervention, to the level of the firm. As a result, the original "model" that Amsden provides as a guide in the opening chapter does not encompass all, or even the most important, elements of her argument. Nonetheless, it is possible to distill four recurrent themes: the central role of the state intervention in markets; the importance of government "discipline" over firms in guaranteeing efficiency ; the importance offirm organization for understanding industrial capabilities; and above all the centrality of technological learning for late industrializers. A central aim of the book is to criticize the notion that Korea succeeded by "getting prices right." For Amsden, "liberalization amounted to nothing more than a footnote to the basic text of Korean expansion" (p.78), a position that stands in obvious contrast to neoclassical orthodoxy. The empirical evidence is mixed. Devaluation Book Reviews183 and selective liberalization of imports for exporters existed side by side with a battery of interventions, and even direct government action through the creation of state-owned enterprises. Amsden is right in emphasizing the crucial role of subsidies...