Latest news with #EconomicPlanningBoard
The Diplomat
04-07-2025
- Business
- The Diplomat
‘Birds of a Feather' Shaped East Asia's Development ‘Miracles'
Strangely enough, the literature on 'state capacity' – including that on industrial policy and on the entrepreneurial state – says very little about the people who staff the higher ranks of the state. Attention may be given to the top-most leaders, but not to the officials responsible for formulating and implementing the key economic development policies. This includes the decades of studies on the 'East Asian miracle' economies and the lauded developmental state bureaucracy epitomized by Japan's Ministry of International Trade and Industry, South Korea's Economic Planning Board, and Taiwan's National Development Council. Behind every successful policy, reform or effective agency is a group of people making judgment calls, managing trade-offs, and shaping the direction of development. Yet most accounts treat these policymakers as faceless parts of bureaucracies. If governments elsewhere are to learn the lessons from the East Asian miracle so that more countries can escape the 'middle-income trap' (only about a dozen economies have managed to do so), a closer look at the individuals behind East Asia's economic miracle is warranted. Whom have these governments recruited (and maintained) to lead high-impact innovation strategies? We tackle this lacuna in our study, 'Who's governing the market?' We compiled a data set of the 1,110 individuals who led innovation policy in Japan, South Korea, Taiwan, and China from 1945 to 2021. We then analyzed who these people were in terms of where and what they studied and where they worked before taking the leading positions. Our primary finding is that there are strong national patterns, meaning high degrees of similarity, in terms of where and what policy leaders studied and where they worked before taking on leadership roles. For example, in Japan the large majority studied in the Faculty of Law at the University of Tokyo, and then worked in government. In Taiwan and China, they tended to study natural sciences and engineering, in Taiwan coming mostly from National Taiwan University and in China from a wider mix of universities. In South Korea they came from a more mixed distribution between law, business studies, engineering, and most studied at the three elite universities. This suggest that in East Asia, similarity of background as both student and professional may have mattered more than subscribing to a particular discipline or ideology. The Power of 'Birds of a Feather Flock Together' This raises questions about the implications of two established ideas. First, that groups that are diverse in terms of cognitive and demographic traits outperform more homogeneous groups. We find that in East Asia it may have been the fact that 'birds of a feather were flocking together' (technically called 'homophily') that enabled their effective pursuit of innovation strategies in line with national development objectives. Second, research on the 'Chicago Boys' in Latin America argues that exposure to particular schools of economic thought (like neoliberalism) shaped reform agendas. According to this argument, the time spent together in Chicago fostered tight social networks and a coherent world view that then translated into 'Pinochet's economists' pursuing neoliberal reforms. In East Asia we find that each country had distinct patterns in terms of the subjects studied and the institutions attended. This leads us to suggest that it may be less the content of what they studied and more the tightness of the shared worldview and social networks that enabled the strong performance. The latter factors have helped to generate a critical condition of an effective developmental state: namely that officials internalize national objectives as their own personal objectives. The quintessential economic miracle, Japan, has the greatest degree of consistency among its policymaking elite, with its innovation policy leaders being six times more likely to have the same educational and professional background than their equivalent cohorts in China, South Korea, or Taiwan. As noted earlier, most Japanese policy leaders studied in the Faculty of Law at University of Tokyo, where the curriculum has long emphasized 'public management' more than 'law' in the English sense. Another common factor: they spent nearly their entire careers within government. Few moved between government and other sectors such as academia or business. This high level of similarity may help explain the strong commitment to the national development vision Japan pursued after World War II. Similarity of background can mean that leaders are more likely to agree on strategies, and more likely to reinforce one another's choices. That can foster coherence and efficiency. On the other hand, it can also limit creativity, because the bureaucracy becomes prone to group think. Similar But Different National Patterns We have four more specific findings about these similar but different patterns across the individuals leading innovation policy for East Asia's miracle economies. First, there are clear national patterns with respect to studying abroad – or not. Japanese officials were the least likely to study abroad. In contrast, many South Korean and Taiwanese leaders studied in the United States, often earning advanced degrees at top U.S. universities. Chinese policymakers were more likely to have studied in Russia or the Soviet Union during the Cold War, although this trend shifted in later decades. Over time, we found a growing reliance on domestic university education across all four countries. National universities have increasingly become training grounds for policy elites, especially for undergraduate degrees. But in South Korea, Taiwan, and China, international postgraduate education still plays a significant role in who gets recruited to top positions. Second, in terms of universities, Japanese policy leaders studied overwhelmingly at just one domestic university: University of Tokyo. Their Korean and Taiwanese counterparts also came from a tiny number of elite national universities – South Korea's 'SKY' universities of Seoul National University, Korea University, and Yonsei University, and National Taiwan University in Taipei, respectively. In contrast, there is more variation among Chinese innovation policy leaders. The two elite universities, Peking and Tsinghua, comprised a much smaller share of Chinese leaders' educational backgrounds than elite universities in the other cases, suggesting a national pattern in which networks in Beijing form as leaders emerge from provincial clusters. Third, in terms of degree subjects, Japanese policy leaders overwhelmingly studied law (at Tokyo University). Japan's approach to teaching law comprises training in public administration and policy, more than the legal studies one would cover in a Western law school. In contrast to Japan's law focus, Chinese and Taiwanese policy leaders mostly have natural science and engineering backgrounds, while South Korea's lead cohort was more disbursed across law, business, social science, and engineering. Again, rather than similarly trained bureaucrats across the four governments, we see nationally coherent and distinct patterns. Fourth, the three prior roles that policy leaders were most likely to hold before taking on their roles were all in government. Among the four countries, Japanese policy leaders had the fewest movements, while Korean policy leaders had more private sector posts, and Chinese and Taiwanese policy leaders moved across academic or think tank positions before leading innovation policy. Perhaps surprisingly, these national patterns have held relatively steady over time. Despite dramatic changes in the global economy and in each country's domestic politics, the preferred universities and degree subjects of policy elites have remained largely the same. East Asia's Flying Geese For too long, the individuals behind the East Asian miracle have been missing from the narrative. The 'lessons drawn' point to structures and strategies, not to the people. Our research suggests that the shared backgrounds of national innovation policy elites in East Asia helped to align goals, smooth coordination, and sustain long-term development strategies. Japan's case is especially striking. Its policymakers' common education, career paths, and institutional loyalty contributed to a shared sense of purpose. That model helped launch the developmental state, and inspired emulators across the region. But even among those 'flying geese' who tried to copy Japan, few matched its level of coherence. It is striking that this pattern of studying law (or in practice, public management) at the elite domestic university was not replicated across the developmental states that followed, especially because research suggests that they purposefully adopted other aspects of the Japanese model. Understanding the human side of policy is crucial for countries looking to replicate East Asia's success. It is not just about having the right institutions or policies on paper. It is also about ensuring the cohesion of the people in charge: their training, experiences, and networks. Countries hoping to develop strong innovation strategies, for example, might focus not just on building pilot agencies or adopting 'the right' policies, but on facilitating shared training for cohorts of future leaders with shared missions. That could mean investing in education at home, creating exchange programs, or fostering ties between government, academia, and business in intentional ways. In practical terms, this could look like the Singaporean government's 'public service commission' scholarship program, which helps the country recruit and retain outstanding talent with similar experiences studying overseas. In short, East Asia's success was not just about what policies were chosen, the architecture of the developmental state, geopolitics. The effectiveness of the region's developmental states also rested on a high degree of similarity ('homophily') in the elite officials who led the national innovation effort, giving them shared objectives across many generations such that they internalized national development objectives as their own personal objectives. The reason so few countries have escaped the middle income trap may partly be that this lesson has, until now, not been one of the standard 'East Asian miracle' lessons. This is a summary of a research paper that was originally published in World Development. Read the full paper here.
Yahoo
29-05-2025
- Business
- Yahoo
Opinion - Trump's economists should study what happened in Japan and South Korea
The Trump administration's economic strategy — achieving trade surpluses and deploying tariffs and non-tariff barriers to protect domestic industries and promote growth — is reminiscent of the strategies that Japan and South Korea pursued during their periods of rapid economic growth in the mid-20th century. Japan experienced annual growth rates averaging around 10 percent from the 1950s through the 1970s, while South Korea achieved similar rates from the 1960s to the 1980s. The economic model behind the rapid economic growth by Japan (and later South Korea) was often referred to as 'administrative guidance,' reflecting significant government intervention in industrial organization, banking and trade compared to more free-market economies. In Japan, elite officials at the Ministry of International Trade and Industry meticulously analyzed trade and productivity data to identify promising sectors. They then guided banks toward providing favorable loans to strategically chosen sectors and firms. This tight public-private collaboration and the shared desire for growth allowed the government and the private sector to rely on mutual signals and support, fueling Japan's remarkable postwar economic expansion. South Korea's administrative guidance was more heavy-handed. Korea suffered colonization, civil war and literal national division in the 20th century. Though South Korea emulated Japan's strategies, it pursued even bolder administrative guidance by investing in sectors such as steel, shipbuilding, automotives and semiconductors — areas where it initially had no clear comparative advantage. To support these ambitious ventures, the government imposed steep tariffs on consumer and luxury goods, and the Economic Planning Board coordinated interest rates and exchange rates to ensure that limited dollar reserves were strategically allocated to targeted industries. But just about when Japan seemed poised to overtake the U.S. economically, it entered its 'Lost Decades.' South Korea's economy also crashed during the 1997 Asian Financial Crisis. Eventually, administrative guidance lost its luster. Japan's economic malaise and South Korea's economic restructuring — under the guidance of the IMF and the U.S. Treasury — served as evidence that administrative guidance distorted the economy, was inefficient and outdated, and further reinforced American liberal capitalism as the superior economic policy. As Paul Krugman put it, perhaps East Asian economic success was more perspiration than inspiration, i.e. more due to hard work and accumulation than increased innovation or labor productivity. Regardless, Japan and South Korea's miraculous economic growth in the second half of the 20th century was real, and administrative guidance played a critical role. Liberal capitalism may still be America's dominant economic ideology, but there is a growing sentiment within the White House that the government should take a more active role in steering the economy. Revisiting lessons from Japan and South Korea's experience with administrative guidance may prove especially valuable at this moment. First, effective administrative guidance requires motivated officials with deep understanding of the economy and public administration. Japan's Ministry of International Trade and Industry and South Korea's Economic Planning Board were staffed by highly trained public servants who not only passed rigorous exams in law, economics and statistics but also learned from their experienced superiors. These extremely talented people committed to serve their country over higher-paying jobs in the private sector. Second, industrial policy is successful when it works with market forces and promotes competition. The U.S. government helped nurture Silicon Valley through early investments in semiconductors, which was later vetted by venture capital. South Korea picked industries to invest in, but pitted firms against each other to promote innovation and productivity. Industrial policy in the U.S. today should be compatible with American financial markets and venture capital. The U.S. financial and private sectors would likely want to invest in AI or future energy rather than coal and steel. Third, expanding trade is essential for economic growth. South Korea had no iron or oil but developed steel, automobiles and shipbuilding. The only way it could develop these industries was by importing what it did not have and exporting value-added products. Strategic openness is necessary for successful industrial policy. Finally, education is foundational to the welfare of the country and its people. America was among the first nations in the world to provide universal secondary education. Its higher education system remains unparalleled in terms of research productivity and its capacity to educate and train the next generation of leaders and citizens. The emergence of the U.S. as the world's political, economic and scientific superpower in the 20th century was built upon a large population of educated citizens. Ensuring high-quality education for Americans must remain a key priority for the 21st century and beyond. Yong Suk Lee is an associate professor at the Keough School of Global Affairs at the University of Notre Dame, where he is the director of the Future of Labor Lab. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
29-05-2025
- Business
- The Hill
Trump's economists should study what happened in Japan and South Korea
The Trump administration's economic strategy — achieving trade surpluses and deploying tariffs and non-tariff barriers to protect domestic industries and promote growth — is reminiscent of the strategies that Japan and South Korea pursued during their periods of rapid economic growth in the mid-20th century. Japan experienced annual growth rates averaging around 10 percent from the 1950s through the 1970s, while South Korea achieved similar rates from the 1960s to the 1980s. The economic model behind the rapid economic growth by Japan (and later South Korea) was often referred to as 'administrative guidance,' reflecting significant government intervention in industrial organization, banking and trade compared to more free-market economies. In Japan, elite officials at the Ministry of International Trade and Industry meticulously analyzed trade and productivity data to identify promising sectors. They then guided banks toward providing favorable loans to strategically chosen sectors and firms. This tight public-private collaboration and the shared desire for growth allowed the government and the private sector to rely on mutual signals and support, fueling Japan's remarkable postwar economic expansion. South Korea's administrative guidance was more heavy-handed. Korea suffered colonization, civil war and literal national division in the 20th century. Though South Korea emulated Japan's strategies, it pursued even bolder administrative guidance by investing in sectors such as steel, shipbuilding, automotives and semiconductors — areas where it initially had no clear comparative advantage. To support these ambitious ventures, the government imposed steep tariffs on consumer and luxury goods, and the Economic Planning Board coordinated interest rates and exchange rates to ensure that limited dollar reserves were strategically allocated to targeted industries. But just about when Japan seemed poised to overtake the U.S. economically, it entered its 'Lost Decades.' South Korea's economy also crashed during the 1997 Asian Financial Crisis. Eventually, administrative guidance lost its luster. Japan's economic malaise and South Korea's economic restructuring — under the guidance of the IMF and the U.S. Treasury — served as evidence that administrative guidance distorted the economy, was inefficient and outdated, and further reinforced American liberal capitalism as the superior economic policy. As Paul Krugman put it, perhaps East Asian economic success was more perspiration than inspiration, i.e. more due to hard work and accumulation than increased innovation or labor productivity. Regardless, Japan and South Korea's miraculous economic growth in the second half of the 20th century was real, and administrative guidance played a critical role. Liberal capitalism may still be America's dominant economic ideology, but there is a growing sentiment within the White House that the government should take a more active role in steering the economy. Revisiting lessons from Japan and South Korea's experience with administrative guidance may prove especially valuable at this moment. First, effective administrative guidance requires motivated officials with deep understanding of the economy and public administration. Japan's Ministry of International Trade and Industry and South Korea's Economic Planning Board were staffed by highly trained public servants who not only passed rigorous exams in law, economics and statistics but also learned from their experienced superiors. These extremely talented people committed to serve their country over higher-paying jobs in the private sector. Second, industrial policy is successful when it works with market forces and promotes competition. The U.S. government helped nurture Silicon Valley through early investments in semiconductors, which was later vetted by venture capital. South Korea picked industries to invest in, but pitted firms against each other to promote innovation and productivity. Industrial policy in the U.S. today should be compatible with American financial markets and venture capital. The U.S. financial and private sectors would likely want to invest in AI or future energy rather than coal and steel. Third, expanding trade is essential for economic growth. South Korea had no iron or oil but developed steel, automobiles and shipbuilding. The only way it could develop these industries was by importing what it did not have and exporting value-added products. Strategic openness is necessary for successful industrial policy. Finally, education is foundational to the welfare of the country and its people. America was among the first nations in the world to provide universal secondary education. Its higher education system remains unparalleled in terms of research productivity and its capacity to educate and train the next generation of leaders and citizens. The emergence of the U.S. as the world's political, economic and scientific superpower in the 20th century was built upon a large population of educated citizens. Ensuring high-quality education for Americans must remain a key priority for the 21st century and beyond. Yong Suk Lee is an associate professor at the Keough School of Global Affairs at the University of Notre Dame, where he is the director of the Future of Labor Lab.
