Westphal, Larry E.

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Swarthmore College Works Economics Faculty Works Economics 12-1-1990 Review Of "Asia Next Giant: South Korea And Late Industrialization" By A. H. Amsden Larry E. Westphal Swarthmore College, lwestph1@swarthmore.edu This work is brought to you for free and open access by . It has been accepted for inclusion in Economics Faculty Works by an authorized administrator of Works. For more information, please contact myworks@swarthmore.edu. Follow this and additional works at: https://works.swarthmore.edu/fac-economics  Part of the Economics Commons Let us know how access to these works benefits you  Recommended Citation Larry E. Westphal. (1990). "Review Of "Asia Next Giant: South Korea And Late Industrialization" By A. H. Amsden". Journal Of Economic Literature. Volume 28, Issue 4. 1735-1736. https://works.swarthmore.edu/fac-economics/316 American Economic Association  ReviewReviewed Work(s): Asia's Next Giant: South Korea and Late Industrialization. by Alice H.AmsdenReview by: Larry E. WestphalSource: Journal of Economic Literature, Vol. 28, No. 4 (Dec., 1990), pp. 1735-1736Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2727456Accessed: 21-09-2017 15:44 UTC JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a widerange of content in a trusted digital archive. We use information technology and tools to increase productivity andfacilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available athttp://about.jstor.org/termsAmerican Economic Association is collaborating with JSTOR to digitize, preserve and extendaccess to Journal of Economic LiteratureThis content downloaded from 130.58.65.13 on Thu, 21 Sep 2017 15:44:40 UTCAll use subject to http://about.jstor.org/terms Book Reviews 1735 100 Economic Growth; Development; Planning; Fluctuations 120 COUNTRY STUDIES Asia's next giant: South Korea and late industri- alization. By ALICEH . AMSDEN. New York and Oxford: Oxford University Press, 1989. Pp. xvi, 379. $29.95. ISBN 0-19-505852-6. JEL 90-0504 This book's title purposefully evokes anoth- er's, Asia's New Giant: How the Japanese Econ- omy Works. Though it remains to be seen whether South Korea is in fact "Asia's next gi- ant," Professor Amsden is correct in implying that its economy is no less deserving of wide- spread attention today than was Japan's in the mid-1970s. She could also have subtitled her book analogously, "How the Korean Economy Industrialized." But her analysis proceeds from a very different perspective, for she argues that Korea's industrial development exemplifies an historically new growth process, "late industri- alization." This leads her to propound a new paradigm that conflicts with what she takes to be conventional economic wisdom. One does not have to accept its paradigmatic discourse to gain a great deal of insight from reading this book. In discussing the underlying sources of Korea's exceptional record in rapidly developing a wide array of internationally com- petitive modern industries, it identifies crucial elements that have been neglected in previous tomes on Korean development (the only excep- tion, one considerably more modest in tone, is Enos and Park, 1988). But this book also does something else. By informatively examin- ing Korea's industrialization in both a compara- tive and an historical context, it isolates central features that uniquely characterize contempo- rary industrialization in a way that few other monographs have. Correspondingly, this book should interest a wide audience. Professor Amsden's analysis starts with the observation that the seminal feature of late in- dustrialization is technological. As at no other time in the past, industrialization today is based on "learning," or on assimilating technology im- ported from abroad; previously innovation also played a role. Korea, like Taiwan, has per- formed better than other late industrializers- such as Brazil, India, Mexico, and Turkey- because it has forged the institutional where- withal to master modern technologies quickly and effectively. (In Amsden's view, Japan does not fully qualify as a late industrializer because its rise as an international competitor did not simply reflect learning plus low wages; pp. 57- 63.) Two facets are critical: "reciprocity be- tween big business and the state . . . and the internal and external behavior of the diversified business group [chaebol]" (pp. 150-51). Much of the book is devoted to examining these facets in detail. The origins of Korea's strong, development-focused government are traced (not altogether persuasively) and its in- sistence that large firms meet tough perfor- mance standards in exchange for extensive sup- port is emphasized. Likewise, the growth of the chaebol is documented and their essential practices are extensively probed. In addition to examining the roles of formal education and foreign technical assistance in the formation of human and institutional capital, the book also analyzes other significant aspects of Korean de- velopment: for example, it argues that stabili- zation has rarely been a concern of short-run macro economic policy, and that Korea's un- precedented rate of real wage growth stems from the high wages that have been given to induce rapid skill accumulation. The book ends with a chapter giving the author's lessons for countries that need to "reindustrialize" and an epilogue that celebrates Korea's recent turn to- ward political democracy. Professor Amsden makes her singular contri- butions in discussing how the chaebol managed so rapidly to acquire substantial technological capabilities in a variety of heavy industries. Case studies of Korea's leading enterprises- including those producing and exporting auto- mobiles, cement, ships, and steel-provide il- luminating evidence about the nature of the learning process and the related economies of scope underlying the rise of the chaebol. No significant issue about the evolution of these business groups and their part in Korea's devel- opment is left unexplored as the discussion ranges from the shop floor to the group head- quarters and beyond. This book is definitely on my shortest lists of essential readings about Korean development and about the process of industrialization more generally. But there is a severe caveat. As the book emphasizes, many of its pronouncements,This content downloaded from 130.58.65.13 on Thu, 21 Sep 2017 15:44:40 UTCAll use subject to http://about.jstor.org/terms 1736 Journal of Economic Literature, Vol. XXVIII (December 1990) such as those concerning the government's role in Korea's industrialization, are highly contro- versial. Professor Amsden considers the gov- ernment to have been the prime mover throughout Korea's industrialization. Other an- alysts strongly disagree. Though my views-on Korea and on contemporary industrialization- are often rather close to hers, I can not accept a number of her fundamental assertions. I focus below on differences regarding Korea. The book contains some rather blatant errors; for instance, the contention that it was not until 1965 that the government, as a result of groping its way toward policies to abate excess capacity, adopted an export-promoting policy regime (pp. 64-69, 145). There is ample objective evi- dence that the government's commitment to the regime came much earlier, certainly no later than 1962. The example just given points to a serious weakness. Consistent with the prominent attention given to the chaebol and to heavy industry, the book has many more perceptive things to say about what drove Ko- rea's industrialization in the 1970s and 1980s than it does about what caused its takeoff in the early 1960s, when neither the chaebol nor heavy industry were prominent. More generally, the book often overstates matters, as it does in alleging that the govern- ment has effectively made all (or all the impor- tant, it is unclear) decisions about "what, when, and how much to produce" on the part of large firms (pp. 79-92, 144). This way of summarizing the effect of interventionist government poli- cies-import protection, export promotion and targeting, plus controls over access to technol- ogy and cheap capital-does not capture the essence of the complex interplay between pri- vate and government initiatives. In the same vein, the book implies that market-reliant poli- cies-that is, policies which rely on market mechanisms for their effect-"amounted to nothing more than a footnote to the basic text of Korean expansion" (p. 78; see also pp. 141- 45). My knowledge of the Korean economy does not in any way support this interpretation. In- stead, it leads me to side with those who see Korea's industrialization as having been driven by the government's practice of a subtle, highly effective mix of coercive intervention and mar- ket-reliant policies. Regardless of the shortcomings of this provo- cative book, its analysis is thoughtful through- out and often conspicuously perceptive. Even if they do not agree with all of its declarations, its readers are certain to obtain fresh insights about the institutional and technological imper- atives of contemporary industrialization. Some will doubtless find they must reappraise their own views about effective policies for industrial development as a result. LARRY E. WESTPHAL Swarthmore College REFERENCES ENOS, J. L. AND PARK, W. -H. The adoption and diffusion of imported technology: The case of Ko- rea. London: Croom Helm, 1988. PATRICK, HUGH AND ROSOVSKY, HENRY, eds. Asia's new giant: How the Japanese economy works. Washington, DC: Brookings Institution, 1976. 130 ECONOMIC FLUCTUATIONS; FORECASTING; STABILIZATION; AND INFLATION A supply-side agenda for Germany: Sparks from-the United States-Great Britain- European integration. Edited by GERHARD FELS AND GEORGE M. VON FURSTENBERG. New York, London, Berlin, and Tokyo: Springer, 1989. Pp. vi, 439. $63.00. ISBN 0-387-50544-X. JEL 89-0780 The major purpose of this collection of essays is to promote laissez-faire economic policy, es- pecially for West Germany. A secondary goal is to explain the failure of West Germany to adopt supply-side policies. The contributed pa- pers are detailed in their descriptions of the German, U.S., and U.K. economies and con- vincing in their advocacy of laissez-faire govern- ment. Most are accessible to a wide audience, including noneconomists. The extreme views and strong rhetoric of the editors, however, may be more apt to antagonize readers than to convert them to free-market thinking. The first item on the agenda is to establish that government economic intervention is un- desirable. First, the authors attempt to demon- strate that excessive regulation has harmed West Germany; they then argue that deregula- tion has benefitted the United States dnd the United Kingdom. Perhaps nowhere is West German economic policy more egregious than in the labor market.This content downloaded from 130.58.65.13 on Thu, 21 Sep 2017 15:44:40 UTCAll use subject to http://about.jstor.org/terms

Review Of  Asia Next Giant: South Korea And Late Industrialization  By A. H. Amsden

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Review Of Asia Next Giant: South Korea And Late Industrialization By A. H. Amsden

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