The Paradox of Catching Up Rethinking State-Led Economic Development
The phenomenon of state-led development has been persistent throughout modern history and remains significant today. Latecomers in the world's development, from Russia in the 19th century to contemporary China, persistently resorted to the state as a deve
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The Paradox of Catching Up Rethinking State-Led Economic Development Li Tan
© Li Tan 2005
Softcover reprint of the hardcover 1st edition 2005 978-1-4039-4954-7 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2005 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-52579-9 ISBN 978-0-230-59807-2 (eBook) DOI 10.1057/9780230598072 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Tan, Li The paradox of catching up : rethinking state-led economic development / Li Tan. p. cm. Includes bibliographical references and index. 1. Economic policy. 2. Central planning. 3. Economic development. 4. State, The. 5. Soviet Union—Economic policy—20th century. 6. East Asia—Economic policy—20th century. 7. China—Economic policy—1976–2000. 8. Central planning—Soviet Union. 9. Central planning—East Asia. 10. Central planning—China. 11. Free enterprise— Soviet Union. 12. Free enterprise—East Asia. 13. Free enterprise—China. I. Title. HD87.T355 2005 338.9—dc22 2005043285 10 14
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To my family
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Contents
Preface
ix
1 Introduction
1
2 Markets and Costs of Using Markets The ‘marvel’ of the market Transaction costs The visible hand
14 16 27 31
3 A Revisit to the Soviet System Input-driven growth Behind the rapid input expansion A narrowly based economy The informational advantage of backwardness The eventual collapse Back to the fundamentals Summary
36 36 39 45 52 58 63 66
4 The East Asian Miracle Developmental state in a historical perspective Integration with the world’s advanced market economies The success of Country Inc. Characteristic of economic leaders Limitations of the state-led approach: lessons
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