WTO forum

Patrick Bond pbond at wn.apc.org
Mon Nov 22 20:39:10 PST 1999

On 22 Nov 99, at 17:26, Dennis R Redmond wrote:
>> a bit more developmental-statism, by the looks of it.
> And that's precisely what they're getting. Most of the assets of Korea
> Inc. were protected by the Government during the 1997-98 meltdown; the
> Government stepped in and bailed out the chaebol,

Developmental-statism... or is that not called lemon socialism? And is government big enough to swallow Daewoo's debt?

> I'm mystified as to why the ANC hasn't had the guts to even look at the
> Asian developmental states seriously. Have they sent experts, economists
> etc. to these countries?

Well, if you ask...

Amazingly, the very best book on this topic -- Ben Fine and Zav Rustomjee's The Political Economy of SA: From Minerals-Energy Complex to Industrialisation (London, Hurst, 1997) -- had its origins in Zav's PhD thesis, and includes a chapter on Korea which I find extremely useful, and another on the developmental state in general... and even more amazingly, Zav was the first post- apartheid Director-General of the Dep't of Trade and Industry... but did virtually nothing consistent with the book as far as I can tell. (Marty Hart-Landsberg and others who have probed much more deeply into the contradictions of the Asian model may not applaud the book as much as I, and it's true that F&R have no take on the coming crisis, but still this work is strong enough that for the past 3 years we've been making it assigned reading for our masters' students at Jhb's main university.)

In fact, however, a post-fordist flex-spec ideology set in amongst the main policy makers (led by minister Alec Erwin, who is also just ending his 3-year presidency of Unctad -- bowing out in Seattle, in fact, in a final splurge of trade-lib frenzy that will further wreck our region's waning industrial base), and that resulted in other advisors -- the hilariously wrong Michael Porter and the religiously post-fordist Rafie Kaplinsky -- successfully pushing wacky ideas like industrial clusters and Spatial Development Initiatives which have essentially crashed.

>From a longer paper on global financial crisis, my own quick
summary of the industrial policy debate (presented last month in Taegu) goes like this:

Heated debates have occurred over the lessons of the South Korean "developmental state," particularly for other semi-peripheral societies in states of flux such as South Africa. During the early 1990s, conservative (usually white) South Africans celebrated the NICs' 1970s-80s successes in terms solely of their a) export orientation; b) modes of labour repression (including superexploitation of women); c) prioritisation of economic growth above democratisation; and d) utilisation of the international division of labour to promote ("flock-of-geese") regional technology transfers and tighter inter- and intra-corporate managerial relations. But so too did leftists read the South Korean experience in a somewhat biased way, highlighting a) aggressive state economic management (including bank nationalisation and active industrial policies); b) the early period (1953- 63) of import-substitution industrialisation which kept multinational corporate investment at bay; c) relatively thorough-going land reform; d) lower inequality than in most semi- peripheral settings (hence boosting effective demand for local consumption); and e) the preferable international situation during the 1960s-70s in which Cold War rivalries and a more rapidly-growing marketplace (with fewer market gluts) facilitated export-orientation.

These, however, were caricatures of ideological positions, and ultimately none of the advocates--right-wing or left-wing--could claim satisfaction that the post-apartheid state followed any of these lessons at all. Indeed, South Korean observers would probably have been horrified at simplistic South African accounts of "how to succeed" in an increasingly neoliberal world based on virtually no contact whatsoever with South Koreans, with the better English-language texts or even with the better expatriate analysts of Korea's lessons (e.g., Walden Bello and Martin Hart-Landsberg). An occasional visit by an Alice Amsden, or growing intercorporate relations between Johannesburg's biggest companies (e.g., Anglo American Corporation) and Seoul's chaebols (e.g., Daewoo) did not influence public debates about potential post-apartheid economic strategy. And the heavily-ideological 1993 book on the East Asian Miracle was rapidly discounted, as information leaked about internal World Bank confusion as to how to characterise the South Korean experience (both before and after the 1997-98 crisis). A more balanced account was required, which understood the South Korean state and market not as opposites but as dynamic parts of a whole, which contextualised state activity in terms of class dynamics, and which considered South Korea's experience at least partly in geopolitical terms.

That account was finally published in 1997, in the form of a central theoretical-comparative chapter in the Ben Fine/Zav Rustomjee book The Political Economy of South Africa. To summarise, Fine and Rustomjee argue for a "link-agency" methodology which draws out the core processes of economic development in South Korea (before applying these to South Africa). Thus with respect to South Korea's impressive backward/forward industrial linkages, Fine and Rustomjee argue that most state subsidies have indeed gone to import-substituting (not exporting) industries; both backward and forward linkages were important (e.g., in the establishment of the ship-building and electronics sectors); foreign direct investment played a very minor role; and the state creatively forged linkages through ownership, finance and R&D. With respect to "agency" (the state, other institutions and social forces playing an active role in economic development), Fine and Rustomjee point to the military's role as a modernising force (in part to counteract the residual dependency effects of Japanese colonialism); the importance of land reform (with even U.S. war-time support) to ridding South Korea of powerful feudal elements in the countryside; the inexorable formation of a middle class, partly as a result; the well-coordinated chaebol characteristics of big capital; the state's introduction of healthy price distortions in credit/commodity markets, away from international price levels; the strong degree of state autonomy from the power of capital (which also allowed the state to shape class formation); and the fact that although Korea could not claim less corruption, at least there was less parasitical activity (such as capital flight) by corrupt elements than in other societies.

Fine and Rustomjee's work should be better exposed to Koreans, who can feed back to South Africa information about its strengths and weaknesses. But whatever the character of the developmental state prior to 1990, the subsequent debate amongst outside, English- language observers about more recent shortcomings has been over whether to place the blame upon dirigiste "crony capitalism" (as would Meredith Woo-Cumings, Stanley Fischer or Lawrence Summers, for example); upon excessive, unphased financial liberalisation consistent with Korea's OECD membership application and U.S. Treasury Department/IMF arm-twisting (as would Ha-Joon Chang, and Amsden and Yoon-Dae Euh); or upon the failure of South Korea's developmental state to be truly developmental, in the interests of the majority of its population and in the context of a global overproduction/overaccumulation crisis for which a comparative advantage in exports was in fact no advantage at all in 1997-98. In the latter camp, Hart-Landsberg and Paul Burkett argue that confusion over interpreting South Korea's crisis is

symptomatic of a global capitalist

system which is increasingly incapable

of accommodating national development

efforts even on its own terms of

competitiveness and growth. The East

Asian crisis is beginning to sweep away

contrary illusions about the

opportunities for "modernization" within

the capitalist framework--illusions which

had largely been created by the special

circumstances of the Cold War and by

the relatively strict subordination of

financial capital to industrial capital in

the immediate post-World War II era.

With these circumstances no longer

present, "successful" capitalist growth

now--even more than before--hinges on

individual countries' ability to keep unit

labor costs internationally competitive,

i.e., to keep working-class living

conditions below international standards

for labor of comparable productivity.

This systemic bias not only makes any

development "success" inherently

self-limiting, it also creates a powerful

tendency toward global overproduction

and further downward pressures on

worker and community conditions on a

global scale.

>From this latter perspective, the Korean
financial crisis looks more like a symptom of deeper economic dislocation, than an underlying cause. If there is any truth to this interpretation, then we must look more deeply at the developmental model to find out whether South Korea and Southern Africa have similar economic distortions that can potentially be resolved through a similar approach to international financial transformation, regional/national economic sovereignty, and local radical basic-needs development strategies.

Patrick Bond (Wits University Graduate School of Public and Development Management) home: 51 Somerset Road, Kensington 2094, Johannesburg office: 22 Gordon Building, Wits University Parktown Campus mailing address: PO Box 601 WITS 2050 phones: (h) (2711) 614-8088; (o) 488-5917; fax 484-2729 emails: (h) pbond at wn.apc.org; (o) bondp at zeus.mgmt.wits.ac.za

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