CHAPTER 5
THE ROLE OF INSTITUTIONS IN ECONOMIC CHANGE
Ha-Joon Chang
Faculty of Economics and Politics, University of Cambridge
and
Peter Evans
Department of Sociology, University of California at Berkeley
Introduction
Institutions are systematic patterns of shared expectations, taken-for-granted
assumptions, accepted norms and routines of interaction that have robust effects on
shaping the motivations and behaviour of sets of interconnected social actors. In
modern societies, they are usually embodied in authoritatively coordinated
organizations with formal rules and the capacity to impose coercive sanctions, such
as the government or the firms.1 Everyone recognizes that institutions are
fundamental to economic change. Nonetheless, despite a resurgence of
“institutionalist” thinking inside and outside of economics over the course of the past
25 years, we are still a long way from a satisfying theory of institutions and their
economic effects.
This paper is a modest attempt at pushing forward our thinking about institutions
and economic change. Discontent with existing approaches to institutions is one
motivation for this effort. The dominant economics canon, bent on conceptualizing
economic change in ways that facilitate more elegant mathematical representation,
has allowed itself to fall into a false parsimony that cripples its ability to understand
major shifts in economic structures. Even conventional “institutionalist” explanations
tend to reduce institutions to functionalist consequences of efficiency considerations
or instrumental reflections of interests. Our aim is to move beyond this “thin” view of
institutions toward a “thick” view, one which recognizes both the key role of culture
and ideas and the constitutive role of institutions in shaping the ways that groups and
individuals define their preferences.
Another conviction guiding this paper is that a better understanding of major
changes in the global political economy is essential for practical as well as
theoretical reasons. The current global economy leaves too much to be desired.
Despite the paeans of the dominant canon to new “efficiency” of global markets,
growth rates have still not recovered to match those of the pre-globalization period
prior to 1973. More disturbingly, the growth that is occurring is of a highly
inegalitarian sort that divides societies and provides a small minority of the world‟s
citizens with large gains at the expense of social, cultural and ecological assets that
are irreplaceable from the point of view of the vast majority. Equally disturbing is the
increased volatility of new global markets, especially financial ones.
1
It should be emphasized that the market is also an institution supported by a range of formal and informal rules
concerning its boundaries, its participants, and the terms of their participation. See Chang (2000b).
Concern over the negative outcomes associated with current patterns of
globalization and the intellectual endeavor of replacing thin approaches to institutions
with thicker ones are two sides of the same coin. Intellectually inadequate
approaches to institutions lead to bad policy and welfare-damaging outcomes on the
ground. People are hurt because social scientists and policy makers misunderstand
institutions. Only a broadly conceived institutional analysis can provide a basis for
theorizing a serious restructuring of globalization. To shy away from the effort to
construct such an analysis would seem irresponsible, regardless of how difficult it
may be to produce even a modest and preliminary version.
We set out our general conceptual framework in the next section. We argue that
an institutional approach must do two things: first, develop a more adequate vision of
how institutions shape economic behaviour and outcomes; second, create a more
systematic and general understanding of how institutions themselves are formed and
change over time. To construct such a vision we must get beyond the traditional view
of “institutions as constraints”, focusing attention instead on institutions as devices
which enable the achievement of goals requiring supra-individual coordination and,
even more important, which are constitutive of the interests and worldviews of
economic actors. Our goal is to move beyond the “thin” economistic models that
dominate the current discourse on institutions. Neither a functionalist view in which
what is must be “efficient” since otherwise it would not exist, nor an instrumentalist
view in which institutions are created and changed to reflect the exogenously defined
interests of the powerful are adequate. Instead, we argue for a more “culturalist” (or
perhaps Gramscian) perspective in which institutional change depends on a
combination of interest-based and cultural/ideological projects (in which worldview
may shape interests as well as vice versa). Simply put, changing institutions requires
changing the worldviews that inevitably underlie institutional frames.
Obviously, our simultaneous emphasis on the constitutive role of institutions and
on a culturalist perspective on institutional formation suggests a perspective in which
institutions and economic actors are mutually constitutive. This in turn leads to the
danger of imagining a self-reinforcing homeostatis: if institutions shaped worldviews
and worldviews shaped institutions in some simple way, stasis would result. To avoid
this, it is necessary to understand how the process of constructing and maintaining
institutions generates tensions and contradictions that force change, and further,
how exogenous shocks may set off or redirect such processes. Lacking systematic
theoretical leverage on this problem, we rely on our two case studies to give us
some purchase.
The remaining sections of the paper present two strategic case studies; these
illustrate our theoretical perspective and, at the same time, generate substantive
propositions about the causes and consequences of institutional change with
applications beyond these cases. The first case study focuses on the national
context – specifically, the Korean developmental state. The developmental state
provides a classic example of how institutions make a difference in economic
change, as it is among the institutions that have most dramatically reshaped the
relative national trajectories of economic growth in the late 20th century. Our attention
centers not on the well-documented emergence of this state, but on its fall. Why
should such an obviously effective institution be subject to political attack? And why
should such an attack succeed so well in undermining this institution?
2
Next we present a case study of the World Trade Organization (WTO) in the
context of the global political economy. This permits us to focus on how existing
organizations of global governance shape the way rules are made and enforced. Our
interest in creating more ideal configurations of global rules then leads us to ask:
What kind of institution building is required to make the projected rules work, and
what is the likelihood that such institutions can be constructed?
The two case studies complement each other and demonstrate the relevance of
an institutional approach to the contemporary global political economy.
Substantively, the question of what kind of division of labor does and should exist
between nation states and international organizations in governing the global
economy is hotly contested. The dominant canon has a simple answer: uniform
rules, “objectively enforced” are the key to global efficiency; distinctive strategies,
such as those created by developmental states, will and should be punished by “the
market.” Without “buying” this hypothesis we also assume that understanding the
global context is essential to understanding the evolution of the developmental state.
Conversely, the WTO is, after all, a membership organization whose members are
states; its functioning is fundamentally shaped by old ideas of national sovereignty.
Theoretically, the developmental state and the WTO provide opportunities for
examining very different processes of institutional change: in the case of the
developmental state, how established institutions are undermined and transformed;
in the case of the WTO, how new institutions are invented.
Having analyzed the possibilities for (and failures of) economic governance in the
contemporary political economy, our chapter concludes by returning to more general
issues. On the substantive level, we examine the implications of the institutional
trajectories we have described for the functioning of the contemporary political
economy, and especially for the possibility of more equitable global growth. On a
theoretical level, we ask what more general hypotheses about the role of institutions
and processes of institutional change. We close with some thoughts on the
prospects for building a real institutionalist alternative to the currently dominant
canon.
Conceptualizing the Causes and Consequences of Institutional Change
In this section, we set out our general conceptual framework for understanding the
nature and the changes of institutions, which will inform our discussions in the
following sections. We begin by underlining the limitations conceptualising
institutions as constraints, and go on to argue that they must also be seen not only
as enabling but also as constitutive of the preferences and worldviews of their
constituents. We then go on to critique theories of institutional change that see only
efficiency considerations or the realization of interests as driving institutional change
and argue for a more culturalist position.
Three Views on Institutions. Mainstream economists do not usually think about
institutions; when they do, they see them as “constraints” on free markets that create
inefficient “rigidities”. The limits of this view are increasingly well known and we do
not dwell on them here. What is surprising is that the rhetoric of “institutions as
constraints” is also carried by many institutional economists who lean toward the
mainstream – the so-called New Institutional Economists (Douglass North, Oliver
Williamson, etc.). For example, according to North, “institutions consist of a set of
constraints on behaviour in the form of rules and regulations; a set of procedures to
3
detect deviations forms the rules and regulations; and, finally, a set of moral, ethical
behavioural norms which define the contours that constrain the way in which the
rules and regulations are specified and enforcement is carried out” (North, 1984, p.
8; italics added).
Of course, the New Institutionalist Economics (henceforth NIE) would not be seen
as breaking new grounds, if it regarded these “constraints” as simply creating
inefficiencies, as in mainstream economic theory. Many NIE theorists are in fact
saying that institutions are there only because they improve efficiency, even to the
extent of committing functionalist errors. However, by employing the rhetoric of
“constraints”, they still maintain the myth that the unconstrained market is the natural
order, while institutions are man-made substitutes that should be (and will be)
deployed only when that natural order breaks down.
If we want to move away from the view of the institution as something “unnatural”,
we need to employ a different rhetoric, namely, seeing institutions as “enabling”
devices rather than constraints. For example, it is only because traffic rules make
individuals drive in a certain way that we can drive faster. For another example, firms
can engage in innovation more aggressively because there are intellectual property
rights, which remove the fear that other agents will copy our ideas and usurp the
gains that should accrue to us. And so on.
This is, of course, not to say that institutions do not impose constraints. Just about
all “enabling” institutions involve constraints on some types of behaviour by some
people. In many cases that involve a collective action problem, these constraints are
“general” constraints that apply to everyone. In these cases, we are putting
constraints on everyone‟s behaviour so that we can collectively do more things,
although even in such cases the distribution of constraints and the benefits from
them may differ across different groups. However, in other cases, enabling of some
people means constraining others. For example, affirmative action enables certain
disadvantaged groups to have greater freedom to choose occupation by constraining
the behaviours of the potential employers in choosing their employees.
So shifting our rhetoric to the “enabling” dimension of institutions from the
“constraining” dimension does not mean that we are negating the constraining nature
of institutions. However, this is an important shift of perspective because we are then
implicitly negating the view implicit in the “institutions as constraints” rhetoric that the
unconstrained market (if such thing is possible at all) is the “natural” order (or what
we call the “market primacy assumption” – see Chang, 1997, 2000a, and 2000b).2
However, there is a third and critically important view of institutions, which gets
relatively little attention among economists.3 This view sees institutions not just as
enabling or constraining, but also as “constitutive”.4 This is because all institutions
have a symbolic dimension and therefore inculcate certain values, or worldviews,
2
Attributing institutional primacy to the market does not necessarily imply endorsing a minimalist view of the
state; the question here is not where the “correct” boundary between the state and the market should lie. Many
economists start their analyses (at least implicitly) from the market supremacy assumption but are keenly aware
of the failings of the market and willingly endorse a relatively wide range of interventions, as well as other
“institutional” solutions (e.g., Arrow, 1974; Schotter, 1985).
3
This view is most explicitly adopted by non-economists such as Granovetter (1985), Douglas (1986), March &
Olsen (1989), Friedland & Alford (1991), Fligstein (1996), Finnemore (1996), and Barnett & Finnemore (1999).
Economists who adopt this view, although using somewhat different languages, include Simon (1983), Hodgson
(1988 and 2000), Bowles & Gintis (2000), and Chang (2000b).
4
Hodgson‟s essay in this volume denotes this as “reconstitutive downward causation.”
4
into the people who live under them. In other words, as we continue to behave under
a certain set of institutions, we begin to internalize the values embodied in those
institutions, and as a result to change our selves.5 This could not happen if human
beings took a totally instrumental attitude towards institutions and rule-abiding; if they
did, they would only keep the rules which are beneficial to themselves (after due
calculation of calculating the changing opportunities for gain and loss as rules are
maintained or discarded, etc.). In such a situation, “value-laden” statements and
actions could only be regarded as cynical and manipulative “marketing ploys”
advancing agents‟ own interests. And indeed this is what is often implicitly assumed
in the mainstream economic literature on institutions, where institutions are seen as
products of rational choice by selfish individuals interested only in material gains.
However, if we follow this line of reasoning, we cannot really explain why institutions
exist at all.
To begin with, if everyone is a selfish rational individual with an instrumental
attitude towards rule-keeping, then there will be inordinate amount of cheating and
shirking around. If this is the case, no institution will be sustainable, because then
the cost of monitoring the possible deviations and punishing them will be truly
prohibitive. Moreover, in this situation, it is questionable whether any monitoring and
sanctioning mechanism against rule-breaking can exist at all. This is because the
monitoring/sanctioning mechanism itself is a public good (in the sense that people
who have not devoted their efforts in monitoring and sanctioning deviants can also
benefit from the improved behavioural standards as a result of such activities), and
therefore no selfish individual will find it “rational” to spend his/her time and
resources in maintaining the monitoring and punishment mechanism. 6
Therefore, unless we accept that people believe (in varying degrees across
individuals, needless to say) in the values which lie behind the institutions concerned
and that they usually act in accordance with these values without constant
monitoring and sanctioning, we cannot explain the existence of any institution.
Needless to say, all the above should not be interpreted as meaning that people‟s
motivations are more or less determined by the institutional structure. If we are not to
lapse into an unwarranted structural determinism, we need to accept that individuals
also influence the way institutions are formed and run, as it is typically done in the
NIE models. However, our approach differs from that of the NIE in that it postulates a
two-way causation between individual motivation and social institutions, rather than a
one-way causation from individuals to institutions, although we believe that in the
final analysis institutions as at least “temporally” prior to individuals (Hodgson, 2000).
These three views of institutions that we outlined above are, of course, not
necessarily mutually exclusive. There is no inconsistency in saying that institutions
are constraining, enabling, and constitutive all at the same time. And indeed unless
we recognize all three aspects, our analysis of institutions will not be complete, as
we try to show below.
Formation and Change of Institutions. Whether one sees institutions as
constraining, enabling or constitutive, the question of how they change is crucial. The
strong element of legacy, inertia, and path dependence in the determination of
institutional forms must be acknowledged at the start. Even new institutions are built
5
6
Of course, the “original” selves are themselves products of the existing institutional structure.
In the words of Mary Douglas (1986), “[c]ollective sanctions are a form of collective action” (p. 27).
5
out of the raw material of existing institutions – the developmental state out of old
bureaucratic traditions, the WTO out of GATT and so on. Formalistic models that
don‟t take institutional inheritance seriously and fail to recognize that new institutions
are likely to be first and foremost adaptations of prior institutions will miss the mark.
Nonetheless, institutions do change and we need better theories of how and why
they change. If we want to understand how and why particular institutions decay, or
what conditions create opportunities for renovating or reinventing institutions, we
must begin from a general perspective on how institutions are created and change.
We can broadly divide the different approaches to the origins of and changes in
institutions into two groups, namely, the efficiency-driven approach and the interestbased approach, with sub-approaches in each group, each with very different
theoretical and policy implications.
Efficiency-driven Approaches. In the most simplistic version of the efficiencydriven view on institutional change, institutions are seen as emerging when the
market mechanism fails to allow all the potential efficiency-enhancing transactions to
be realized. In this version, the rational wealth-maximizing agents will not fail to seize
upon the opportunities for efficiency enhancement, if setting up a new institution –
say, a firm – is going to increase the gains from trade. In this Panglossian vision,
therefore, all institutions that exist are efficient (examples will include authors like
early Douglass North, Harold Demsetz, Armen Alchian, and the “property rights
school” of Frubotn & Pejovich and Yoram Barzel). And if any institution that is
ostensibly capable of enhancing efficiency in a given context does not exist, it is only
because the transaction costs involved in constructing such institution are larger than
the benefits the institution delivers, in which case it is not really worth having.
It is clear that in this simple form, the view is untenable for both theoretical and
empirical reasons. Theoretically, when bounded rationality7 is one of the important
reasons that we have institutions, it stretches our credulity to argue that individuals
who are not even capable of doing the standard optimization exercise involving only
resource costs is capable of engaging in a “meta-optimization” exercise involving
both resource costs and decision-making costs (or transaction costs). Empirically,
we simply observe too many examples of inefficient institutions, whose persistence
does not really serve anyone‟s interest.
As a result, some of those who hold this vision acknowledge that, at a given point
of time, there may exist inefficient institutions, but they argue that these institutions
will be “selected against” in an “evolutionary” process in the long run (Alchian, 1950,
is the classic example).8 However, even this more sophisticated evolutionary version
has an obvious limit. The problem is that institutions are, by definition, not easily
malleable (a perfectly malleable institution will be as good as no institution), and
therefore that typically “the rate of change in the environment will exceed the rate of
adjustment to it” (March & Olsen, 1989, p. 168). If this is the case, there cannot be
any presumption that institutional evolution is moving in an optimal direction (see
Chang, 1995, for further discussion).
In a more sophisticated version of the efficiency-driven approach to institutions, it
is admitted that that not all institutional changes are of efficiency-enhancing kind and
therefore that many of them will not be optimal even in the longer run (so, the
7
8
The term is due to Herbert Simon. Simon (1983) is the best exposition of this view.
For a comprehensive discussion of evolutionary approaches in economics, see Hodgson (1993).
6
simplistic “evolutionary” argument is rejected). The reason for this, according to
those who take this approach (such as Brian Arthur, Paul David, and Joel Mokyr), is
that the evolution of institutions involves path dependency.
In this view, certain institutions (say, technological regimes) may be chosen over
others, not because of their inherent efficiency but because of certain irreversible
“events” in history. The best example in this regard is probably that of “network
externality”, which gives the first-movers a selection advantage through the
frequency-dependent definition of “evolutionary fitness” (e.g., the competition
between different computer operating systems). For another example, if certain
irreversible investments have been made in certain physical, intellectual, and
relational “specific assets” (the concept is due to Williamson, 1985) assuming the
presence of particular institutions, the relative efficiency of the existing institutions
vis-à-vis alternative institutions will have been enhanced, as the holders of these
assets will have vested interests in preserving the existing institutions (see Chang &
Rowthorn, 1995, for an elaboration of this point).
This perspective has allowed us to better understand the process of institutional
changes. However, at least in its present form, it remains very “economistic” in that
the process of institutional change is driven basically by technological factors, and in
that individuals are seen as operating on the basis of purely “economic”, rational
calculations (even though it is admitted that rational calculations by individuals do not
necessarily amount to a socially optimal outcome). The essential problem with this
approach is that there is no room for human agency in the sense that what people
believe (instead of what they “should” believe, given the technological imperatives)
does not make a difference to the process of institutional change. 9
The most sophisticated version of efficiency-driven approach extends the
argument to the “cultural” dimension in the sense that the worldviews possessed by
human agents matter. The proponents of this view start from the assumption that
human agents have bounded rationality (a concept to which Williamson and other
more “purist” efficiency-driven theorists give lip service to but do not really adopt in
practice) and argue that institutions make the complex world more intelligible to them
by restricting their behavioural options and also by confining their scarce attention to
a truncated set of possibilities.
Bounded rationality, according to this vision, makes it inevitable that we operate
with a mental “model” of the world (or value system, ideology, worldview, or
whatever we may choose to call it) that may not necessarily be a good, not to speak
of being perfect, model of the real world. Given the adherence to a certain worldview
by the actors, they may prefer a certain institution because it happens to fit their
worldview (or “moral values”), even when it is not necessarily efficiency-enhancing
from an “objective” point of view. In this way, the optimality conclusion is negated,
albeit not in the economistic (or technology-driven) way that the second version of
the efficiency-driven approach disposes of it.
Some of those who espouse the “culturalist” version of the efficiency-driven
approach go one step further and argue that what worldview people hold is not
independent of the institutions under which that they have been operating – or that
there is “endogenous preference formation” (see for example, Hodgson, 1988, and
Chang & Rowthorn (1995) attempt to combine this approach with what we call the “culture-based structuredinterest approach”.
9
7
Bowles and Gintis, 2000). The argument is that institutions embody certain “moral
values”, and by operating under certain institutions for a period of time, it is likely that
people begin to internalize those values (this is what we called the “constitutive” role
of institutions).
Note that even with these “subjective” elements (such as moral values and
worldviews) thrown in, the approach is ultimately driven by efficiency – only that the
definition of efficiency now takes on a subjective dimension. And in this sense, we
can still call this a version of the efficiency-driven approach, however different it may
appear from simpler versions of efficiency-driven institutionalist theory that we
discussed earlier (see section 2.2.1.1).
Interest-based Approaches. The most simplistic of the interest-based approaches
to the origins of institutions and institutional change is the Neoclassical Political
Economy (as pioneered by Anthony Downs, James Buchanan, Gordon Tullock,
George Stigler, Ann Krueger, Jagdish Bhagwati, Mancur Olson, and Douglass
North). The same view is found in some cruder version of Marxian political economy
(those who see the state as the executive committee of the bourgeoisie) (for some
critical reviews of this literature see Chang, 1994, chs. 1-2, and Stretton & Orchard,
1994).
In this view, institutions are but instruments of advancing the sectional interests of
groups that are politically organized enough to initiate changes in institutions in a
way that suits their interests – the so-called rent-seeking theory of Buchanan,
Tullock, and Krueger is a good example (Buchanan et al. (eds.), 1980, is the
representative work). Advancement of “global” interests, as far as it happens, is
treated as an unintended consequence.
In this approach, it is believed that interests are not socially-structured but
exogenously given at the individual level. So interest groups have no internal
constraints in their agenda setting and decision-making, which is patently not the
case in reality (see March & Olsen, 1989).
Also, the proponents of this view believe that institutions can be quickly changed,
as far as there is the political power base to support the change. In this respect, this
view is similar to the most simplistic version of the efficiency-driven view of
institutional change, because in both views, institutions are seen as infinitely
malleable, as far as there is a good reason to change them (be it some global
“efficiency” or some dominant “interest”). In this respect, many of the criticisms that
we lodged against the simplistic efficiency-driven view apply here too.
The more sophisticated version of the interest-based view of institutions agrees
with the first view that institutions change not on the basis of some global efficiency
but according to sectional interests and are therefore fundamentally “biased” towards
certain groups. However, in this version, interests are not exogenously given, but
“structured” by existing political and social institutions. Hence the name we give to it,
namely, “structure-interest-based” version.
In his famous discussion of the emergence of the capitalist factory system, “What
Do Bosses Do?”, Stephen Marglin (1974) argued that existing (capitalist) property
relations determined the way in which capitalist-style firm organization was chosen
over worker-managed firms, when the latter did have efficiency advantages (but see
Williamson, 1985, for a critique of this argument from an “efficiency” point of view).
Robert Brenner, in his famous discussion on the revival of feudalism in Eastern
8
Europe, argued that the same exogenous shock of rising grain prices led to the
demise of feudalism in Western Europe whereas it led to its strengthening in Eastern
Europe because of the differences in their existing institutions (Brenner, 1976; see
Aston & Philpin (eds.), 1985, for the subsequent debate). Sam Bowles and Herb
Gintis, in a series of recent articles, have emphasized that the “contested” nature of
exchange relationships in credit and labour markets make the market outcomes
dependent on the existing power relationships (e.g., Bowles & Gintis, 1993, and
1996).
The structured-interest-based view also differs from the Neoclassical Political
Economy view in that it does not see institutions as easily malleable as the latter
view does. This is because the proponents of this view see interests as structured by
existing institutions, which means that changing the balance of power between
existing interests (which is necessary for an institutional change) is not going to be
instantaneous or straightforward but will have to involve changes in deeper
institutional structure.
The most sophisticated version of the interest-based view on institutional change
may be called “culture-based structured-interest” view. Those who hold this view
argue that there cannot be such thing as “objective interests, which can be
understood independently of the actors‟ understandings” (Friedland & Alford, 1991,
p. 244). Therefore, while they agree with others who hold an interest-based
approach that institutional changes are driven by interests, they argue that
institutional changes are “simultaneously material and symbolic transformations of
the world”, which involve “not only shifts in the structure of power and interests, but
in the definition of power and interests” (Friedland & Alford, 1991, p. 246).
While the proponents of this view agree with those who believe in the most
sophisticated version of efficiency-driven view that people internalize the values
embodied in institutions, they also point out that “rules and symbols … sometimes …
are resources manipulated by individuals, groups, and organizations” (Friedland &
Alford, 1991, p. 254).
For example, Friedland & Alford (1991) argue that the success of the American
capitalists in the early 20th century in persuading the society to accept the (fictitious)
legal status of a juridical person for a corporation was crucial in allowing them to
institute limited liability, which then enabled large-scale mobilization of capital
through the stock market (p. 257). They also argue that the success by the workers
in advanced capitalist economies in making the wider society to accept the extension
of the notion of citizenship rights of due process and even participation to
employment relations in private firms allowed them to institute grievance procedures
(p. 257).
Thus seen, the proponents of this view see the project of institutional changes not
simply as a “material project” but also as a “cultural project” in the sense that
changes in institutions require (or at least are helped by) changes in the “worldview”
of the agents involved. And once we allow the possibility of “cultural manipulation”,
the role of human agency becomes a lot more important than in any other version of
the theories of institutional change that we have talked about, as it is necessarily the
human agents who actively interpret the world (albeit under the influences of existing
institutions) and develop discourses that justify the particular worldview that they
hold. Indeed, we should not forget, to paraphrase Marx, that it is human beings who
make history, although they may not make in contexts of their own choosing.
9
In this case, “context” is actually a complex nesting of contexts, especially in a
globalized world. The worldviews of individual agents are nested composites of the
immediate culture of communities and organizations, national ideologies and, as we
will see in the discussion of the developmental state, an increasing pervasive global
culture. Having admitted the cultural construction of interests, political economy
should also have a theory of culture, which obviously is a tall order. Nonetheless,
introducing even a primitive theoretical consideration of ideology and worldview into
the discussion of institutional change allows for qualitative improvement over simple
efficiency and interest-based theories.
The (Rise and) Decline of the Korean Developmental State
Introduction – Why the Developmental State? In the post World War II period,
a small set of countries in East Asia stands almost alone in having significantly
improved their position in the world hierarchy of nations. During the post-war period,
per capita income growth rates in Japan, Korea, and Taiwan have been in the region
of 5-6% per annum. By contrast, per capita income growth rate in the major nowadvanced capitalist countries during the Industrial Revolution (1820-1870) was about
1% per annum.10
This unprecedented growth involved a fundamental transformation of East Asian
economies from poor exporters of primary products to sophisticated producers of
high value-added manufactured goods; even in Japan, silk and silk-related raw
materials were the biggest export item until the 1950s. Flying in the face of western
advice that they should stick with those products that reflected their “natural
comparative advantage,” these countries constructed new bases of comparative
advantage. Starting from economic levels comparable to the more prosperous
countries of Africa in the 1950‟s (even Japan‟s per capita income during the 1950s
was lower than that of South Africa), they had moved to European income levels by
the mid-nineties. Further, all this was accomplished in countries whose Confucian
cultures had been derided in the West and whose elites had seemed hopelessly
corrupt and ill-suited to anything beyond agrarian exploitation or tax-farming.
Conventional growth models that depend on individual entrepreneurs responding
to market signals did not predict and could not explain the kind of transformation that
occurred in East Asia. Only dramatic institutional innovation can explain it; and to the
chagrin of neo-classical theories, there is a consensus that the state played a critical
role in this unprecedented process of economic and social transformation. It is for
this reason that these states were dubbed “developmental states.”
Without recapitulating the voluminous writing on the developmental state, 11 it is
10
This figure is the arithmetic average of per capita output growth rate figures for the US, Canada, Japan, the
UK, France, West Germany, and Italy. The same figure for the subsequent periods were 1.4% in 1870-1913 and
1.2% in 1913-1950. The figure was “only” 3.8% even during the “Golden Age of Capitalism” (roughly 1945-73).
See table 8.1 (p. 117) in Armstrong et al. (1991). If sustained over time, small gaps in growth rates have huge
consequences. if a country‟s per capita income is growing at 1% per annum (this is the case of Argentina during
the postwar period), per capita income will double in 70 years – not the 12-15 years that it took Korea or Taiwan
to do it. A country with per capita income growth of 0.3% per annum – the case of Bangladesh until the 1980s –
would require 230 years to double its per capita income.
11
The concept originated with Johnson‟s (1982) analysis of Japan in the 1950‟s and 1960‟s. See Amsden (1989),
Wade (1990), Chang (1993), Evans (1995), Akyuz, (ed) (1999), and Woo-Cumings (ed.) (1999) for subsequent
elaborations. World Bank (1993) and World Bank (1997) also grudgingly acknowledge the fundamental role of
the state.
10
worth underlying some of this literature‟s basic postulates. At the root of these
changes was a revitalization of centuries-old bureaucratic traditions and their
redirection, for a variety of ideological and geo-political reasons, toward the
accumulation of industrial capital. This permitted relationships with local private
sector elites, combining support, protection, and discpline, that fostered these elites‟
willingness to invest in risky industrial ventures. The transformation of the state
fostered a transformation of the capitalist class into a singularly effective variant of
the classic industrial bourgeoisie.
All of this makes the subsequent decline of the developmental state a fascinating
puzzle from the point of view of institutional analysis. With the recent economic
crises in the region conventional theorists were quick to try to wipe out the troubling
“developmental state anomaly” by claiming that the crisis demonstrated that the
developmental state had been a charade all along. Unfortunately for their quest for
parsimony, this interpretation does not stand up to even minimal scrutiny. First of all,
whether or not the recent crisis is due to the “failure” of the developmental state, the
economic and social progress achieved by the developmental states over the last
half century or so in the region cannot be erased from history. Secondly, the recent
crises in the region are the result of the decline, rather than the persistence, of
developmental state (see below and also Wade, 1998, Singh, 1999, Chang, 2000c).
Thirdly, the developmental state is a threatened institution not primarily because it
was economically ineffectual, or even because its potential economic efficacy has
been undercut by globalisation. The problems of the developmental state lie first of
all in domestic politics and in the domestic political consequences of economic
success.
While this analysis applies in varying degrees to the full range of East Asian
developmental states, the Korean case stands out as the most interesting. When it
was in its ascendancy, it was the most dramatic, if not necessarily most effective,
specimen of this species; and its subsequent decline was the earliest and most
comprehensive. The transformative projects envisaged and implemented by the
developmental states of Japan and Taiwan during the postwar period were not as
comprehensive and forceful as that of Korea. In the case of Japan, its longer history
of industrialization not only required less state involvement in the transformative
project, but also necessitated a more consensus-oriented approach in the state‟s
dealing with the private sector. In the case of Taiwan, Kuomintang‟s position as an
“occupation authority”, as well its allegiance to the semi-socialist ideals of Sun Yatsen‟s Three People‟s Principle, implied that the transformative project could not be
as ambitious or as well-integrated with the activities of the private sector as that of
Korea.
Equally dramatic, however, was the decline of Korea‟s developmental state,
although, as we point out later, its institutional and the ideological legacies still
remain considerable and some of them may even be revived in the future, depending
on the economic and the political evolution of the country. While the other East Asian
developmental states also went through changes that saw the decline in their
dominance and legitimacy over time, these do not rival what has happened in Korea.
The Japanese developmental state has been under considerable criticisms since the
late 1980s and particularly recently with the continuing recession, but its loss of
political legitimacy has not reached anywhere near the Korean level. In the case of
Taiwan, the dominance of the developmental state continues, albeit in a somewhat
muted form, as exemplified by its near-imperviousness to the worldwide trends of
11
privatization and capital market opening.
How then did the mightiest, if not necessarily the most shrewd and agile,
developmental state fall so spectacularly? And what are the lessons that we can
draw from this experience for the theories of institutional change? To answer these
questions, we need to discuss the rise of the developmental state in Korea in the first
place.
The Rise of the Korean Developmental State. The Korean developmental state
emerged from a most unpromising environment. While the legacies of the protodevelopmental state that existed under Japanese colonial rule were important (Kohli,
1994), the enormity of the destruction of the colonial institutional fabric after 1945
(the end of Japanese rule) cannot be underestimated. For one thing, the end of
Japanese colonialism in 1945 unleashed political turmoil, which wreaked havoc on
the institutional structure the Japanese left behind. The American occupation of what
eventually became South Korea until 1948 increased the nation‟s institutional
turmoil, as many American-style institutions were grafted onto this Japanese
institutional structure. Needless to say, the Korean War (1950-53) exacerbated
social and institutional dislocation even further.
The regime of Syng Mahn Rhee that ruled South Korea from its birth in 1948 until
1960 was fundamentally anti-developmentalist. Its only stab at developmentalism
was the establishment of the Ministry of Reconstruction in 1955. This Ministry,
however, acted primarily as a liaison with aid donors; it did not even formulate a
development plan until 1959, and this plan was never implemented. The
bureaucracy was nominally organized along meritocratic lines; but between 1949
and 1961, only 336 passed the High Civil Service Examination, far fewer than the
8,263 who got government jobs through “special appointments” (Cheng et al., 1998,
p. 105). The quality of the bureaucracy was such that, until the late 1960s, Korean
bureaucrats were being sent to Pakistan and the Philippines, among other places,
for extra training.
As is well known, things began to change after the coup by General Park Chung
Hee in 1961. It should be noted that, as some authors emphasize (e.g., Chibber,
1999), the Park regime did not begin with a clear blueprint for a new developmental
state, and engaged in a series of institutional experiments in its early days. However,
it had a fundamentally developmentalist outlook and implemented some critical
institutional changes from the beginning, laying the foundation for a full-fledged
developmental state that we saw in action later. The more important of these
changes included: establishment of the super-ministry, Economic Planning Board,
with both planning and budgetary authority, and the start of five-year plans;
nationalization of the banks (after the privatization of many banks by the Rhee
regime in the late 1950s with prodding from the American aid officials); civil service
reform; the establishment and/or encouragement of various business sector “peak
organizations”; the establishment of public and semi-public agencies to help
business, such as the state trading agency, KOTRA.
What is often ignored is that these institutional changes also resulted in a critical
“ideological” or “worldview” change. The institutional changes made by the Park
regime in the early days embodied a nationalistic, pro-industry (vs. pro-finance), proproducer (vs. pro-consumer) outlook, which emphasized capital accumulation,
innovation, and structural transformation – namely the ideas associated with
developmentalism. This outlook contrasts with Anglo-American market liberalism
12
with its emphasis on consumer welfare, price competition, and allocative efficiency –
all emulated, if poorly, by the Rhee regime.
These institutional changes formed the basis for a cascade of changes in the
behavior of the private sector, which in turn produced an extra-ordinary
transformation of the Korean economy. From a backward exporter of tungsten and
ginseng, Korea became first an exporter of labor-intensive manufacturer goods (e.g.,
textiles, shoes, wigs) and then a world power in capital- and technology-intensive
exports. In steel, an industry in which western advisors were uniformly convinced
that it had no comparative advantage, it was able to make profits while selling at half
the U.S. list price (Amsden, 1989, p. 317). In semi-conductors, an even more
improbable area for investment, the Korean output surpassed that of the major
industrial powers of Europe (Evans, 1995). All of this, of course, makes explaining
the subsequent decline of the developmental state a particularly crucial task for any
institutional theory of economic change.
The Decline of the Developmental State. In a sense, the Korean developmental
state was challenged from the beginning – in the 1960s, by the conservative, prodemocratic alliance led by Yoon Bo Sun, and in the 1970s by the pro-democracy,
center-left opposition forces led by Kim Dae Jung (president, 1998-2003) and (to a
lesser extent) Kim Young Sam (president, 1993-8), since the 1970s. However, the
fundamental challenge came from the Neo-liberal forces, which began to crystallize
from the late 1970s onward in an alliance among the “liberal” faction of the
bureaucracy, the majority of the intellectual community, and the increasingly
powerful business conglomerates (the chaebols).
Neo-liberal forces made a critical breakthrough after the assassination of General
Park in 1979 by his intelligence service chief. Initially, the political vacuum left by the
death of Park seemed to open a space for the pro-democracy center-left forces led
by the two Kims. However, these were soon crushed by the two-stage military coup
(1979-80) staged by the “new military,” led by General Chun Doo Hwan, and
culminating in the Kwangju massacre (May 1980).
General Chun was by no means a Neo-liberal, but he allied himself with Neoliberal bureaucrats and implemented a series of institutional changes signaling the
start of a Neo-liberal offensive against the developmental state. He adopted the antiinflationary rhetoric of Neo-liberalism in a bid to deal with the inflationary pressures
created by the second oil shock and the subsequent world recession exacerbated by
the monetarist macroeconomic policies of major industrialized countries. He
privatized a number of banks and partially liberalized the financial market in 1983.
He also introduced the 1986 Industrial Development Law (IDL), which shifted the
country‟s industrial policy in a “functional” (as opposed to a “selective”) direction.
By no means, however, did changes under Chun‟s rule make the subsequent
demise of the developmental state inevitable. While its force was somewhat
diminished, developmentalism still remained the overarching ideology of the regime,
and proved formidably effective in certain areas, such as information technology
industries (Evans, 1995). Many of the formal institutional changes in Neo-liberal
direction made under Chun, such as financial liberalization (Amsden and Euh, 1990)
and the IDL (Chang, 1993), were limited in scope Their effectiveness was curtailed in
part by the inertia built into more-slowly-changing informal institutions such as
bureaucratic convention and business practices.
13
Massive pro-democracy protests in the summer of 1987 triggered a more
fundamental shift. Huge public actions protested Chun‟s attempt to use the rigged
electoral college system to hand the presidency over to General Roh Tae Woo, his
chosen successor and erstwhile collaborator. These protests succeeded in forcing
the military to capitulate to public demands for a democratic presidential electoral
system (Roh did manage to win the subsequent election held in late 1987).
The consequent political discrediting of the military rule led to a rapid weakening
of the legitimacy of developmentalism, because it was seen (in our view mistakenly)
as the former‟s Siamese twin. What was decisive in this process was the increasing
conversion of the intellectual elite, especially the bureaucratic elite, to Neo-liberalism.
An increasing number of elite bureaucrats and academics earned advanced degrees
in the US at the height of its Neo-liberal revolution; the return of this cohort to Korea
meant more and more people inside and outside the government who were
convinced of the virtues of free market, and who regarded developmentalism as a
“backward” and “mistaken” ideology.12 In this ideological battle, the Neo-liberals were
critically helped by the ideological dominance of Anglo-American academia and
media at the world level. Neo-liberalism thus established itself as the dominant
ideology among Korean elite circles, including the elite bureaucracy, in the late
1980s and early 1990s.
Many of the bureaucrats, however, still had instinctive attachment to
developmentalism. This is readily seen in the intellectually-confused policy
documents of the time, wherein Neo-liberal pronouncements on overall policy
direction make an uneasy fit with developmentalist policies in particular areas.
However, the conversion of many bureaucrats to Neo-liberalism was wholehearted
and even dogmatic. For example, by the early 1990s, one frequently encountered
bureaucrats from the Economic Planning Board, which somewhat paradoxically had
become the home of Neo-liberalism in the Korean state at the time, calling for a
radical retreat of the state and especially for the abolishment of their own ministry on
the ground that planning, if it ever was desirable, was no longer feasible due to the
increasing complexity of the economy.13
Moreover, since the late 1980s the chaebols increasingly viewed the Korean state
as more of a liability than an asset in their competitive struggle in the world market.
The many spectacular successes they had had in export markets, such as memory
chips and automobiles, which were previously regarded as the exclusive domains of
more advanced economies convinced them that they could now stand on their own.
Their confidence was corroborated by the approval they started gaining in the
12
Alice Amsden (1991) first highlighted the potential danger to the Korean economic model of the rapid increase
in the numbers and intellectual ascendancy of what she calls the ATKEs (American-educated Korean
economists). In the annual listing of economics Ph.D‟s published between 1987 and 1995 in the Journal of
Economic Literature, Korean names constitute approximately 9.7% of all listed names (776 out of 8,040). This is
an astonishing statistic, given that Korea accounts for about 0.75% of world‟s population (and that very few of
these names represent Korean-Americans). An overwhelming proportion of these economists subsequently
returned to Korea, steering university economics education increasingly in a Neo-liberal direction. In addition,
many elite bureaucrats, increasingly educated along Neo-liberal lines in Korean universities, were sent to the US
for advanced study; most eventually returned to their old jobs in the Korean government.
13
It is interesting to speculate on why the “planning” ministry became the home of pro-market Neo-liberal thinking
in the Korean bureaucracy. One possibility is that, not tied to particular “clients” as were other economic
ministries, the EPB had traditionally behaved more “ideologically”, whatever the ideology in favor. Another is that
the EPB, as the top economic ministry, always recruited people with top scores in the economics section of the
High Civil Service Examination; this meant that its bureaucrats were likely to do better in graduate studies in the
US, and hence to earn more prestigious degrees.
14
international capital market. By the mid-1990s, the leading chaebols were
considered creditworthy enough to float bonds in advanced-country capital markets.
Their rapidly growing foreign ventures also started to weaken their identification with
the nationalistic outlook of developmentalism.14
By the mid-1990s, the chaebols had become staggeringly aggressive in calling for
the withdrawal of the state from economic management. “Owners” and the top
managers of leading chaebols made public pronouncements against state
intervention at every conceivable opportunity. The chaebols also set up a small but
extremely well-funded research institute called Korea Centre for Free Enterprise,
which churned out numerous documents with a Neo-liberal flavor, translated
classical works in the Neo-liberal tradition (such as Hayek and Buchanan), and
invited well-known American Neo-liberal thinkers to give high-profile talks in Korea.
The height of this offensive was the ultra-Neo-liberal policy report prepared by the
Federation of Korean Industries (FKI), the club of the chaebols, in the spring of 1997.
This report called for a radical retrenchment of the state and, among other things,
called for the abolition of all government ministries except Defense and Foreign
Affairs and the consequent reduction of government bureaucracy by 90%. The public
uproar following this document‟s pre-publication leak forced its official withdrawal,
and showed that the Korean public was not yet ready for this kind of ultra-Neoliberalism. But the mere fact that this report could be prepared as a public document
by the FKI shows how aggressive the chaebols had become in their offensive
against the developmental state.
It was not simply the haute bourgeoisie who wanted to dismantle the
developmental state. The professional classes also started to revolt against the
nationalistic and anti-consumer biases of developmentalism. These people had been
previously happy to comply with the “buy Korean” policy and the consequent
restriction on luxury consumption, but they now wanted to exercise their newlyacquired purchasing power on domestic and foreign luxury consumption goods
without guilt about being “unpatriotic” and “anti-social”. As a result, they now wanted
further trade liberalisation and the lifting of restrictions on luxury consumption goods
and luxury housing. They were also beginning to feel frustrated by the “protective”
regulations concerning agriculture, urban planning, and small-scale retailing, which
put restraints on their ability to engage in consumerism – a frustration that found its
most vivid expression in fascination with the “quality of life” (cheap food, spacious
housing, large cars, and huge shopping malls).
A further push towards Neo-liberalism was provided from the late 1980s onward
by insistence of the US and other advanced countries that what was now regarded
as a developed country should abandon the “unfair” protections provided to their
industrial and financial enterprises and thus give these nations‟ firms better access to
an increasingly attractive market. When the Kim Young Sam government decided in
1993 to join the OECD, opening up markets became more imperative, as this was a
conditions for membership.15
The resulting changes leading to the dismantling of the Korean developmental
14
By the mid-1990s Korea was one of the largest foreign investors in a number of developing and transition
economies, not just in Asia but also in Europe (e.g., Indonesia, Vietnam, Poland, Uzbekistan). It was also one of
the largest investors in the UK electronics industry.
15
Korea was accepted as a member of the OECD in 1996.
15
state and (in our view) subsequently to the current crisis, have been documented
elsewhere (see Chang, 1998, Chang et al., 1998, and Chang & Yoo, 2000, for
further details). The dismantling of industrial policy, the hallmark of the
developmental state, had its tentative beginning in the late 1980s, and was
completed by the mid-1990s. Financial liberalization, including capital account
liberalization, gained momentum after 1991, but accelerated in 1993, when Korea
signed a bilateral agreement with the US for financial market liberalization and
opening. Most symbolically, the 5-year plan was terminated in 1993; and in that
same year, the Economic Planning Board was abolished (as some of its own
members had wished for some time) and merged with the Ministry of Finance to form
the Ministry of Economy and Finance in 1994. Although certain residues of
developmentalism could still be found in places (e.g., supports for R&D in certain
high-technology industries), the dismantling of the developmental state was
effectively finished by the middle of Kim Young Sam‟s presidency (say, 1995).
As is well known, the subsequent financial crisis contributed to a further decline of
the developmental state. At the ideological level, the discrediting of the
developmental state model has become even stronger. Neo-liberal forces inside and
outside the country have managed to blame the current crisis on the developmental
state, despite the fact that it was already effectively, if not completely, dismantled
before the crisis – various models identifying industrial policy, cronyism, and the socalled “logic of too big to fail” as the main cause of the crisis are examples of such
efforts (see Chang, 2000c, for some detailed criticisms).16 And as a result,
subsequently many additional institutional changes have been made by the current
Kim Dae Jung government, sometimes willingly and sometimes under IMF pressure,
that further destroyed the foundations of the developmental state.
The additional liberalizations of financial markets, of international trade, and of
foreign direct investments that were implemented in the early days of the current
crisis under IMF pressure are well known by now. Less well-known is the rewriting of
the central bank constitution to give it both independence and a single-mindedly
focus on inflation control, both features that are contrary to the pro-industry (and antifinance) outlook of developmentalism (for further details, see Chang & Yoo, 2000).
Even less known, however, are the changes in the organization of the government.
After the crisis, the head of the Ministry of Economy and Finance (MOFE) was
demoted from the position of a deputy prime minister to a simple minister. Control
over the government budget, which had given the MOFE such clout in earlier days,
was transferred in May 1999 to a new small ministry, the Ministry for Planning and
Budgeting; this new ministry was also given the (perhaps largely symbolic) oversight
of “government reform”. The Ministry of International Trade, Industry, and Energy
(MOTIE) saw its crucial trade-related functions transferred to the Foreign Ministry
and as a result becoming the much weaker and demoralized Ministry of Commerce,
Industry, and Energy (MOCIE).
16
Of course, this is not to say that the Korean developmental model was without flaws. There were some obvious
weaknesses, such as the excessive concentration of even high-tech export industries in commodity-type
products (specialisation in DRAM rather than custom chips), which made the country vulnerable to international
demand cycles. However, it is not entirely clear how much of this was due to the Korean developmental state per
se. The lopsided character of Korean industrialization, and the emphasis on scale economies (DRAM chips) over
niche markets (custom chips), for example, are responses to the technological and organizational obstacles
associated with breaking into the more sophisticated segments of export markets. In any event, the lopsided
specialization of Korean industries only intensified with the state‟s abandonment of investment coordination
across sectors and firms (see Chang et al., 1998).
16
These changes in government organization symbolize a fundamental shift in the
role of the state in the economy. The reassignment of the EPB‟s former functions
between the MOFE and the MPB, along with the demotion of the MOFE minister,
implies that whatever remains of the government‟s planning function no longer
requires concerted efforts and serious inter-ministerial coordination. The new central
bank constitution eliminates the pro-industry bias in macroeconomic management.
The transfer of trade functions to the Foreign Ministry means that trade policy is now
seen as a part of diplomacy and not an integral part of industrial policy.
Another important post-crisis development is the weakening of the elite
bureaucracy itself.17 As many people attributed the recent crisis to the dirigiste model
of development, the elite bureaucracy as its protagonist naturally came under severe
criticism. The criticism did not simply involve criticisms of particular policies. Now the
very legitimacy of the institution of bureaucracy itself was, with the help of the Neoliberal “government failure” rhetoric, being undermined. At the same time, the Kim
Dae Jung government has been keen to weaken the elite bureaucracy, which it sees
as representing the corrupt and inefficient ancien regime, and imbue more
“entrepreneurial” and “service-oriented” ethos into the bureaucracy by vastly
expanding, and indeed setting up a quota for, mid-career “special appointments”
through a competitive recruitment process open to those who are not career
bureaucrats – in other words, it has started the process of destroying the Weberian
bureaucracy that was so critical in its development and moving to a more “American”
model of bureaucracy.
All these have led to an unprecedented demoralization in the elite bureaucracy;
when combined with aggressive head-hunting by the private sector, this has led to
an unprecedented hemorrhaging of personnel from the elite bureaucracy. For
example, since the crisis, dozens of high-flying young bureaucrats between their
mid-30s and mid-40s in the elite ministries, especially the Ministry of Finance and
Economy, have moved to chaebol firms – something such people would have never
have done before the crisis.18
Despite these “gestalt shifts” and formal institutional changes that followed the
recent crisis, the imperatives of crisis management have paradoxically re-activated
some of the developmentalist policy devices that were laid to rest during the mid1990s. For example, the Kim Dae Jung government implemented various
programmes of state-mediated industrial and corporate restructuring, a staple of the
Korean developmental state – such as the so-called “Big Deal” programme of
“voluntary” business swaps and mergers among the leading chaebols, on the one
hand, and the state-led restructuring of Daewoo and other bankrupt chaebols, on the
other hand. For another example, the MOCIE in late 1999 introduced a programme
of promoting “star firms” in parts and materials industries and stepped up export
promotion measures. Further, in autumn 2000, the Kim Dae Jung government
restored the post of the Minister of Finance and Economy to its former status at the
Deputy Prime Ministrial level. Without how long-lasting or effective these “revivals” of
17
On the importance of Weberian elite bureaucracy in economic development, see Evans & Rauch (1999) and
Rauch & Evans (2000).
18
Prior to the crisis, elite bureaucrats would have moved to the private sector only later in their careers, after
exhausting their career possibilities within the government, via a process known in Japan as amakudari.
17
developmentalist policies will be, these trends show how some patterns can recur
even in times of a most radical institutional overhaul.19
Theoretical Implications. This analysis of the rise and decline of the Korean
developmental state supplies us with some interesting insights into the process of
institutional change. It shows that institutional change is a highly complex process,
involving multi-directional and often subtle interactions between “objective” economic
forces, ideas, interests, and existing institutions themselves, unlikely to be captured
by simple application of efficiency or interest-based models.
Simple efficiency-driven explanations of institutional change (as per section 2
above) perform poorly when applied to this case. For example, many people argue
that the demise of Korean developmental state was inevitable, because, with
economic development, the economy has become too complex to centrally
coordinate. Even if we accept the argument that economic development necessarily
makes centralized coordination more difficult by making the task of coordination
more complex, which in itself is a highly contentious proposition 20, the argument still
does not explain why such demise happened in Korea at the time when it happened.
If it is the stage of development at which a particular country is that determines the
functionality of a given state form (e.g., developmental state), why did the Korean
developmental state go into a decline when the country was at the stage of
development similar to where Japan was in the 1960s or the 1970s, when the latter‟s
developmental state was in its prime?
If we are to understand the exact timing and the manner of the demise of the
Korean developmental state (and more generally the timing and the exact form of
any institutional change), we also need to look at the ideological battles and the
changes in interest group politics (and their interaction with each other) that
surrounded the process. For example, the fact that many government bureaucrats in
Korea turned against state interventionism – so much so that by the early 1990s
some EPB bureaucrats were calling for the abolition of their own ministry – flies
directly in the face of what we call the “simple interest-centred view of institutional
change”, such as the one found in Neoclassical Political Economy, which, a la
Niskanen, predicts that bureaucrats have interests in expanding their bureaux.
Unless we understand the influences of Neo-liberal ideologies, which denies the
legitimacy of state intervention in general and particularly of planning, on these
bureaucrats, we will never be able to understand why they campaigned for the
reduction of their own power and influence.
Having emphasized the importance of ideas in the process of institutional change,
we do not wish to give the impression that ideas should be treated as a uniquely
independent force that things like interests and institutions are not. While ideas are
not simply “marketing ploys” of interest groups, it is difficult for an idea to be
sustained in the long run without some appeal to important interest groups. The
offensive by the chaebols and the “revolt” by the upper-middle classes, both of whom
had been great beneficiaries of the success of the developmental state, against
Support for developmentalism may remain at the grassroots level as well. While many Koreans regard Park‟s
developmentalism as the root cause of the current crisis, 20 years after his death Park consistently ranks in the
top 10 in various opinion poll rankings of individuals who are most influential in running today‟s Korea.
20
Economic development may increase the complexity of the task of coordination, but it also develops the
society‟s administrative and coordination capabilities both within and outside the government. Therefore, it may,
on the whole, make such exercise easier, rather than more difficult (for a more detailed discussion on this issue,
see Chang, 1999).
19
18
Korean developmentalism in the 1990s that we discussed above are very good
cases which illustrate this point.
For another example, while our discussion shows how powerfully ideas can shape
the course of institutional change, it is wrong to envisage a one-way relationship
between the two. As we argued above, institutions affect the ways in which people
who operate under them perceive the world (the “constitutive” role of institutions).
And therefore it is not possible to see them as objects of manipulation by agents with
exogenously-formed “preferences”, because the way in which such “preferences” are
formed is itself affected by the nature of existing institutions. To take an example
from the Korean case, we may say that the historical association between the
developmental state and military dictatorship made many people who may not have
been otherwise inclined to do so object to developmentalism.
Another point that emerges from our discussion is the need to think more
seriously about the importance of human choices in determining institutional
changes – not the empty Neoclassical choices, which are more or less predetermined by “objective” conditions and fixed preferences, but hard-to-predict
choices involving a complex process of balancing ideology and interests. For
example, some people who put emphasis on path dependency in institutional
changes (or follow the “sophisticated version of efficiency-driven explanation of
institutional change”) argue that Park‟s choice for a Japanese-style
developmentalism was an “obvious” one, given the institutional legacies of Japanese
colonialism (see, e.g., Kohli, 1994). However, when Park came to power, the
American model would have been the more obvious choice. At the time, many formal
institutions of Korea had been already put in their place by the American Occupation
Authority, and the tendency towards the American model was further strengthened
by what the Rhee regime did (e.g., establishment of a quasi-independent central
bank, privatization of banks, American-style spoils system in the bureaucracy). Also,
given the country‟s near-total economic and political dependence on the US at the
time, a Korean leader would have benefited the most by emulating the American
model (regardless of the possibility of “success” of this approach, given local
conditions). Given all these, it required certain amount of initiative on the part of Park
and his key aides to move away from this “easy” choice of embracing the American
model.
The decline of the developmental state involved the same kind of complex
choices. The Kim Young Sam government did not have to go to the extent it actually
did in dismantling the developmental state. The easier choice would have been to do
what its predecessor, the Roh government, did – namely, to let it wither away slowly.
In the above, we argued that there was no compelling “economic” need for Korea to
dismantle its developmental state when it did. Moreover, although there were strong
domestic and foreign interest group pressures for a weakening of the developmental
state, there was no necessity to formally end the 5-year plan, which by the late
1980s already had lost many of its teeth anyway, or to join the OECD, which no
interest group was actively asking for. In other words, the Kim government‟s
dismantling of the developmental state needs to be seen as containing an important
element of active choice by its key policy-makers on the basis of their ideology,
rather than simply reflecting interest group pressures or “objective” economic
conditions.
Finally, the rise and especially the decline of the Korean developmental state
19
demonstrate the way in which the “nesting” of worldviews shapes processes of
institutional change. Kim Dae Jung government‟s identification of both chaebol and
the state bureaucracy with anti-democratic militarism represents an ideological view
generated by Korean experience and political debates. The convictions of American
trained economists that the developmental state could not possibly work, on the
other hand, represent the impact of global worldview on Korean institutional change.
The increasing importance of global institutions and worldviews in shaping the
evolution of national institutions like the developmental state is one of the reasons
that it makes sense at this point to turn our attention to institutional change at the
global level.
Institution-building at the Global Level: The WTO as an Illustrative Case
Having been the central public actors in the definition of economic policy for
hundreds of years, states‟ powers are now challenged by the construction of global
institutions. While modern states have always had to share power with private
transnational actors, during the past 50 years a set of public organizations have
been established that can be considered the embryonic embodiment of global
governance institutions. It is not completely fanciful to suggest that they might
eventually come to play a role at the global level analogous the role that states have
played within their national territories over the last 400 years.
This contemporary period of intensive institution building is then particularly
intriguing from the viewpoint of an institutional approach to economic change. For
despite the extensive literature on international organizations, we know surprisingly
little about how key contemporary global governance institutions function as
organizations, how their own structuring facilitates or impedes the possibility of
realizing different visions of the global economy, or how modifying their structures
might affect the future evolution of the global system. Looking at the formation of
these new institutions thus provides an opportunity to develop and test theoretical
ideas concerning how institution-building works.
Global institution-building also has implications for institutions at other levels,
including the developmental state. Global institutions both embody and re-shape
global norms and worldviews, which in turn are incorporated into the worldviews of
actors at the national level. Global institutions are also a constraining and enabling
context for institutions at the national level, making it harder to maintain some
institutions and easier for others to emerge. At the same time, the relationship
between global institutions and nation states is anything but one-way [was: zerosum]. Global governance institutions depend fundamentally on the capacities of
nation states to execute their goals, even while they may enhance the capacities of
nation states in certain areas by providing political clouts and technical assistance.
Looking at global institutions is a powerful reminder that institutional change is a
multi-level process.
In this section, we will focus on one global governance institution, the newest
addition to the Bretton Woods family – the World Trade Organization (WTO). While
the WTO is a unique institution, it illustrates some archetypical features of global
governance institutions. Examining the WTO will permit us to underline the point that
institutional questions are not superseded by the shift toward a political economy
organized on a global instead of a national level, and to the contrary gain a new
salience as economic actors attempt to “re-scale” the organization of production and
20
exchange.
The WTO (like other global governance institutions) exists because the more
sophisticated, internationalist currents in the corporate and political leadership of the
U.S. and other developed countries realized that a global market requires a complex
set of institutional underpinnings. As the “realist” theory of international relations (cf.
Waltz, 1979) correctly underlined, an international system of independent sovereign
states (commonly referred to as a “Westphalian” system) has strong elements of
anarchy at the global level. Anarchy does not lend itself to stable market
relationships, to say nothing of long-term investments. Reducing the level of anarchy
to get the stability and predictability necessary for a global economy to operate is the
whole point of global governance institutions.
Institutionalization involves a trade-off wherein the strong accept certain
constraints to get more reliable consent from weaker players (and each other),
enabling them to do more (see section 2.1). It is by no means an uncontested tradeoff. Opting for the benefits of institutionalization instead flies in the face of a
worldview, constructed over the course of hundreds of years, in which sovereignty is
politically sacred. Even developing countries – India for example – are fiercely
defensive when they see international norms infringing on their sovereignty. The
point is that, as Steven Weber (1999) has pointed out, global governance
institutions, as organizations, attract little political loyalty. The supposedly
anachronistic institution of the nation state looks charismatic when compared to
these institutions.
Within the U.S. political class, the “bilateral real politik” version of global
governance, in which economic and political threats against less powerful nations
replace invocations of international norms, is a very attractive alternative to the
compromises involved in trying to institutionalize governance norms at the
international level. In short, while prerogatives of sovereignty have unquestionably
been eroded, political worldviews built on the foundation of sovereignty continue to
be very powerful and to make the construction of global governance institutions into
a very uncertain task.
Support for global governance institutions requires a sophisticated sense of the
long-term dangers of normlessness and a corresponding appreciation of the returns
to institution-building. Sophisticated internationalists like George Soros and Robert
Rubin have at least implicitly realized that the current global economy is haunted
anew by the “Polanyi problem.” Looking at the rise of national markets, Polanyi
(1957[1944]) argued that the socially unsustainable character of “self-regulating”
markets generated a natural “protective” reaction on the part of a variety of social
groups, including a portion of the elite. Unfortunately, in Polanyi‟s analysis this
protective reaction was overwhelmed by the inability of the same protective reaction
to prevail at the international level. International markets, particularly financial and
currency markets, could not be successfully regulated. First the collapses of the gold
standard and then degeneration into the barbarism of Fascism were the result.
In the post-World War II period, the Polanyi problem of reconciling free markets
with stable social and political life was taken up again through the construction of a
set of international norms and institutions, including the “Bretton Woods” institutions
at the global level, complemented by an understanding of the importance of
continued regulation (especially of capital flows) at the national level (Hveem, 1999).
This made possible what John Ruggie (1982) called “embedded liberalism” –
21
international openness combined with social protection and regulated through an
interconnected set of powerful nation states. Embedded liberalism helped produce
the generation of prosperity in the core industrial countries that is sometimes called
the “Golden Age” of capitalism (on the rise and the fall of the Golden Age, see the
essays in Marglin & Schor (eds.), 1990).
Gradually, however, the evolution of transborder economic relations undermined
this new set of institutions. Embedded liberalism had never been successfully
extended to the Third World, and had no good way of dealing with increased Third
World participation in worldwide manufacturing production. In addition, its
international institutions depended heavily on the foundation of the nation state,
whose power was undercut by the increasing speed and magnitude of international
transactions. Once again, inability to regulate markets at the international level
created social dislocations that seemed beyond the ability of “normal” domestic
politics to resolve. The “re-scaling” of the global economy brought the Polanyi
problem back to life (see Block, 1999, for further discussions).
As globalization erodes the institutional foundations of embedded liberalism and
the Polanyi problem rears its ugly head once again, new institutional structures must
be constructed at the global level. Failure to do so would threaten profits as well as
the well-being of ordinary citizens, but success can by no means be taken for
granted. The difficulty of the task creates new risks of descent into barbarism. Global
governance institutions like the WTO represent a strategy for transcending the
Polanyi problem.
There are, of course, different ways of transcending the Polanyi problem. The goal
of the U.S. Treasury and the international financial community is to provide an
institutional foundation for the universalistic enforcement of narrowly defined market
norms. The political base for this form of transcendence is very powerful but equally
narrow. Embedded liberalism went well beyond this conception and it is not at all
clear that the narrower view is politically viable.
Another quite different view of building global governance institutions is the vision
that was adumbrated in the formation of the United Nations, and is epitomized in
efforts to enforce universal norms around issues like human rights and
environmental sustainability (cf. Keck and Sikkink, 1998; Evans, 2000). This vision of
globalization aims at the universalistic enforcement, not of a narrow set of market
norms, but of a broad set of democratically formulated socio-political norms. For
holders of this view, global institutions that only enforce narrow market norms, even
if they do so universally, may easily be judged worse than no global institutions at all.
This was probably the position of the majority of the protestors in Seattle in
December 1999. An alliance between supporters of this view and nationalist
adherents to the bilateral real politik view could be politically potent.
Such an alliance would also draw the support of a fourth group – believers in a
romantic version of a decentralized political economy, organized not around
sovereign states but at the local level. John Zerzan, intellectual leader of the “black
block” anarchist faction that drew major headlines in Chicago represents this view21,
but its adherents are spread widely across the left-right spectrum. Any kind of global
governance is an anathema to this group. For them, the Polanyian collapse is part of
For an interesting discussion of Zerzan‟s “anarcho-primitivist” ideology, see The Wall Street Journal, Dec. 6,
1999, A17.
21
22
the solution.
All of this is to say that building global governance institutions is a delicate
business. Interests remain important, but worldviews are even more so. Definitions
of what is “efficient” for whom are slippery. Individuals whose apparent interests
would seem to be identical may have diametrically opposed positions and alliances
among people who define their interests in completely different ways are equally
likely. All of this can be illustrated by looking at the brief and tumultuous life of the
WTO.
Four features of the WTO as an organization should be underlined. First, and
most obvious, is its centrality to global economic governance. Second is the
surprisingly democratic character of its formal decision-making procedures. Third are
the tensions and contradictions between formal and informal realities, both in terms
of its governance role and in terms of its decision-making procedures. Finally, and
perhaps most important, the political vulnerability of the WTO (and global
governance institutions more generally) needs to be underlined.
The formally democratic character of the WTO (in contrast to the IMF, for
example) is, at first, surprising. Formally, each of the WTO‟s 135 member states has
an equal vote. Since there is no equivalent to the Security Council, this makes the
WTO in theory even more democratic (in the Westphalian sense of one nation one
vote) than the United Nations. Its governing “General Council” allows representatives
of all major countries (with the notable exception of China and Russia, although the
former is expected to join soon) to participate in relative equality (at least formally)
and the WTO ministerial conferences have been accompanied by extensive public
debate.
On the other hand, if we turn from theory to practice, the WTO is a classic
oligarchy. The precedent, established in the GATT, that all decisions are made by
consensus allows the U.S. and other major nations to set the agenda. Nonetheless,
informal oligarchy remains in tension with formal democracy and this tension creates
some interesting potential for change.
Despite the dominance of the informal rules in practice, the formal rules still
provide a basis for political threat. The United States and the advanced industrial
countries will be in a difficult political position if a large block of developing countries
were to say, “It is not possible to achieve consensus. Therefore, this issue must be
taken to a vote.” However, recent experience -- in particular the recent struggle over
delecting a WTO Director General and the collapse of the Seattle “Millennium
Round” – demonstrate that, on the one hand, it will not be easy for the US and the
EU to simply ignore developing countries when they decide collectively to fight for
something, but on the other the impact of such political threats on outcomes is not
clear.
The contrast between formal and informal realities also applies to the WTO‟s
power and centrality to the global trading system, but in a different way. As the
organizational embodiment of the GATT, the WTO is the central forum for regulating
international trade (see Krueger, 1998). As Ruggie (1998) has nicely underlined,
regulating international trade has come to include passing judgement on “traderelated” domestic policies, which can mean anything from environmental regulations
to tax laws. This creates the impression that the power of the WTO might even
extend inside domestic boundaries. Furthermore, unlike organizations like the ILO,
23
the WTO has the ability to legitimate sanctions if its rulings are not followed. It is,
therefore, a legitimate reflection of the general perception of the importance of WTO
when a former member of the WTO secretariat (Blackhurst, 1997:533) writes of its
“emerging role as the pre-eminent international economic organization.”
In formal terms, the WTO does not appear to be a very powerful organization.22
But the WTO is seen as powerful because it is viewed as embodying the interests of
the world‟s major economic powers. The WTO exists because powerful national
players wanted to focus the politics of international trade disputes on an international
organization whose decisions are likely to be considered legitimate, precisely
because it is formally democratic and because those who make individual decisions
are bureaucrats not beholden to any particular country. The WTO‟s informal power
then lies in the fact that it is the concrete representation of the informal consensus
and solidarity that makes the international trading system work.
Yet at the same time, the formal aspects of the WTO regime remain a potentially
important source of support from smaller countries looking for relief from the world of
bilateral real politik, in which they are relentless bullied by the “great powers” (most
obviously the United States). The “dispute settlement mechanism,” which interprets
rather than formulates policies, is more formal and transparent. While informal
oligarchy is still not irrelevant, Costa Rica may occasionally prevail in a case against
the U.S., which is not likely to happen in a world of bilateral real politik. The dispute
settlement mechanism is, in fact, a good example of how universalistically enforced
norms help bring weaker parties on board, even if they have little effective say in the
formulation of the rules themselves, and even if the general content of the rules does
not reflect their interests. Apparently transparent and objective governance features,
like the dispute settlement mechanism, are fundamental to the ability of
organizations like the WTO to claim international legitimacy, but they are obviously
no help vis a vis U.S. politicians interested in avoiding any limitations on the
hegemon‟s sovereignty.
Curiously, organizations like the WTO may be more vulnerable to attack from the
hegemon that pushed for their creation than from the poor nations that are excluded
from the informal oligarchy that shapes their policy. The unusual ideological
character of the United States makes it peculiarly unsuited to play the institutionbuilding role that one might expect the global hegemon to play (cf. Evans, 1997).
There is a powerful current of elite ideology within the United States that is both
profoundly distrustful of any kind of public governance institutions and deeply
apprehensive of anything that might reduce the absolute sovereignty of the United
States itself. This segment of the conservative political elite is completely supportive
of free markets but has little appreciation of the institutional infrastructure necessary
to make such markets work, particularly at the global level. Distrust of government in
any form combined with deep-seated xenophobia turns any institution of global
governance into the enemy. Hostility from traditional conservatives (principally in the
United States) who will be hypersensitive to any WTO actions considered to infringe
on U.S. sovereignty is almost inevitable.
At the same time, an increasingly active civil society has begun to take a serious
and vociferous interest in the politics of globalization. These groups are either
interested in governance in the sense of universalistic enforcement of a broad set of
Its only formal power is to legitimate countries‟ right to engage in bilateral trade sanctions when their interests
have been damaged by trade restrictions that violate WTO agreements.
22
24
democratically formulated socio-political norms that would reconstruct the market
rather than simply expand it, or they are hoping to re-establish some political and
economy autonomy at the local level. The success of global governance in the
Soros/Rubin sense of universalistic enforcement of narrow market norms would be a
defeat for both groups. Unless organizations like the WTO can convince the first
group that it can somehow serve as an instrument in promoting the broader set of
socio-political norms, something at least along the lines of embedded liberalism,
frustrated civic groups have every reason to try to get their national governments to
withdraw support from the organization. A progressive-conservative alliance of
political groups whose only point of agreement is that the WTO should be dismantled
is far from fanciful, especially in the United States.
The political vulnerability of the WTO is compounded by the lurking power of the
global democratic majority, which is to say the developing countries. In the Uruguay
Round, the developing countries were willing to accept promises in return for their
concessions on issues like TRIPS, finances, and services. In Seattle, perhaps
emboldened by the willingness of the demonstrators outside the meetings to
challenge the status quo, they drew the line.
For developing countries, universal enforcement of narrow market norms (as in
the case of the dispute settlement mechanism) may represent a marginal
improvement over the bilateral bullying of a real politik world, but as long as the
mandate is narrowly defined and the content of these narrow rules is determined by
an oligarchy of rich countries with advice from private firms, global governance is
only a marginal improvement over Westphalian anarchy for them.
Developing countries want, and need, a set of rules that not only resuscitates the
social protections of embedded liberalism, but expands embedded liberalism beyond
the OECD countries. They also need rules that don‟t simply reinforce the privileges
of the firms and countries that currently control global markets, but provide some
support for efforts to “catch-up.” If global governance is to gain their reliable political
support, it must go beyond narrow market norms. Are the sophisticated
internationalists who have the most to gain from a stable institutionalized global
system willing to use the WTO and other similar institutions to reconstruct global
markets in a way that responds to such demands? Or, will they risk their efforts at
global institution-building (and in the longer run increase the possibility of Polanyian
collapse) to preserve the current definition of the legitimate global market?
If institution building were simply a question of efficiency and interests, the outlook
would seem hopeful. Transnational capitalist elites are much better off if global
governance organizations enforce some broader norms while providing stability and
predictability, than they are if global governance founders for lack of political allies.
Even in the short run, having to abandon an organization like the WTO would be a
major shock to investor confidence in the predictability of global political economy,
something that sophisticated internationalists must avoid at all costs. The bargain is
not all that dissimilar from the one that produced the welfare state and embedded
liberalism, except that it must be constructed at the global level.
Unfortunately, the process of institution building is more complicated and less
predictable. If we could count on global elites making rational choices, the world
would be a more pleasant place than it is. If experience is any guide, elites are
unlikely to accept “rational” compromises unless they are under political pressure
sufficiently intense to jar them out of business as usual. Opportunities for more
25
progressive trajectories of institution building at the global level depend not just on
the responsiveness of elites but on the formation of complex alliances among groups
with disparate interests as well as common ones.
The complexities of building such alliances are well illustrated by the “core labour
standards” issue. “Core labour standards” (CLS) at their most basic are epitomized
by the recent ILO version, which the U.S. finally agreed to sign up to, is a good
example of a minimalist version, but everyone recognizes (some with hope, some
with fear) that this is the thin end of a wedge and that ultimately CLS could come to
mean things like protecting the right to organize, which is why the concept is
politically interesting.
The argument for inclusion of CLS in the WTO‟s mandate is simple and logical.
The absence of CLS in a particular country can be considered a trade-related basis
for unfair competition just as the absence of intellectual property rights is considered
a basis of unfair competition. Like the privilege of not having to pay royalties to Bill
Gates, not having to pay the wages that labour could demand if it were free to
exercise its collective rights constitutes a subsidy to local producers.
The politics are more complicated. At the national level, advanced industrial
countries with social democratic regimes (especially the Nordic countries) have
predictably been strong proponents of making the enforcement of CLS part of the
WTO‟s mandate. On the other side, the main opponents of including labour
standards in the WTO‟s mandate are developing countries. Their opposition stems
from two different sources.
First there is always the sovereignty issue. Third World leaders see CLS as giving
the WTO one more excuse to intrude on their internal affairs. Second, they see
limitations on local firms‟ ability to exploit labour as threatening their comparative
advantage. Desperate to increase their exports to developed country markets, Third
World governments are terrified that the labour standards issue might be used
against their exporters. And, of course, many developing country leaders may see
normative changes at the global level that might increase the bargaining power of
local labour as a bad thing for their local business allies.
U.S. labour movement, which is a central political constituency from the point of
view of the current U.S. administration, sees institutionalizing global labor standards
comparable to those that operate in the U.S., especially in the more economically
competitive regions of the Third World, is a bedrock issue (See Palley, Drake and
Lee, 1999).23 For the administration‟s corporate constituency, on the other hand, the
issue is less salient. While they are beneficiaries of the absence of labour standards
in developing countries, major U.S. transnationals are also aware that the diffusion of
CLS would be at most a minor detriment to their global profit rates. For U.S. labour,
then trying to get a US administration to support core labor standards beyond its
boundaries certainly has more prospect of being a winner than trying to prevent
capital from investing abroad or trying to impose general restrictions on the entry of
foreign consumer goods into the US.
To make progress on this issue, however, international allies are essential. U.S.
labour must have significant allies within at least the most important developing
countries. Again, logically it would make sense for Third World labor to support CLS,
23
In principle a similar logic applies to European trade unions, but for these unions the question of labor
standards within the EU takes political precedence, leaving U.S. labor unions as more salient actors on the issue.
26
even if national political leaders did not. Being able to threaten both employers and
national politicians with international sanctions if local labor rights were not respected
could be a powerful new bargaining tool. Yet, so far there are no visible examples of
public political support for trade-enforceable international labour standards by major
Third World trade union movements.24
The reasons for the lukewarm response of Third World trade union movements
are not hard to understand. For decades the international position of U.S. labor has
combined opposition to the most militant Third World labor movements on grounds
that they might be Communists with unabashed protectionism. Not surprisingly then,
Third World labor sees the support of U.S. trade unionists for CLS as motivated less
by international labor solidarity than by the desire of privileged Northern workers to
deny Southern producers access to Northern markets and thereby avoid sharing the
returns from global productivity increases with their brothers and sisters in the South
– in short protectionism (c.f. Amsden, 2000, p. 14).
For U.S. labor then, trying to use the WTO to improve global enforcement of labor
rights means completely renovating its relationships with Third World labor
movements, building concrete ties and demonstrating solidarity. Old attitude in which
Third World workers are dangerous because they are “willing to work for too little”
have to be replaced by a new vision in which Third World labor is a key political ally
that must be supported.
In short, the core labor standards case provides a very nice illustration of how
institution-building efforts can play a constitutive role, pushing groups to redefine
their interests in interesting and unexpected ways. The argument can be
recapitulated briefly as follows:
1. An international organization is created by governments acting as agents of the
more sophisticated elements of transnational capital, to provide a more politically
efficient and effective institutional means of allowing a more stable, less costly
expansion of international openness and increasing the transparency and
predictability (and consequently reduce the volatility) of the global economy, thereby
reducing the threat of the “Polanyi problem.”
2. Once these aims are embodied in a concrete organization, the organization
inevitably becomes the focus not only of the aspirations of those that like the existing
mode of globalization and are hoping (through the creation of the organization) to
strengthen it, but also of those who are hostile to globalization. Thus, on the one
hand, we have powerful conservatives interested in recovering an idealized
Westphalian past, in which sovereign power was the vehicle of global aspirations
rather than being compromised by them, and on the other hand, we have a host of
less privileged social actors substantively threatened by the inegalitarian
consequences of globalization and therefore hostile to the idea of strengthening the
institutional infrastructure of globalization (as long as globalization is defined as
“governed free markets”). This inevitable but unintended (and apparently
unforeseen) consequence leaves the organization (and its original project) politically
vulnerable.
24
In some cases (e.g. the Indian National Trade Union Congress), the response has been consistently and
strongly negative (Haworth and Hughes, 1997). In other cases (e.g. CUT in Brazil, COSATU in South Africa), the
response has been ambivalent at best.
27
3. The existence and potential power of the organization also change the
incentives and potential strategies open to groups harmed and threatened by the
existing mode of globalization – in this case developed country labour and
particularly the U.S. labor. This adds the strategy of imposing a different set of global
norms to their traditional (and hitherto relatively ineffectual) strategies of trying to
resist globalization through national level strategies aimed at insulation from the
global economy.
4. The one-nation/one-vote definition of democracy that was (naturally and indeed
almost inevitably) incorporated into the internal governance of the WTO forces any
group that wants to try imposing a different set of global norms to find allies within a
range of developing countries and do whatever is possible to strengthen the local
political position of these allies. Thus, one of the unintended consequences of the
creation of the WTO was to create an additional incentives for the U.S. labour
movement to redefine its interests in a more internationalist direction and to engage
in concrete efforts to strengthen both its ties to Third World labor movements and the
local political clout of these movements. The important role of labor in the
demonstrations in Seattle (largely ignored by the media) underlies the WTO‟s role in
helping to shift labor‟s attention from domestic to global politics.
Regardless of how the core labor standards issue ends up playing out, the case of
the WTO serves to illustrate the necessity of taking an institutional perspective to
understand economic change at the global level. It reinforces our initial argument
that institutional change cannot be explained by functional/efficiency or
instrumental/interest logics but must also take into account the independent impact
of worldviews and ideologies. Likewise, it validates our contention that institutions
must be seen as constitutive of the worldviews as well as being shaped by them.
Conclusion: Towards an Institutionalist Approach to Economic Change
When our analysis of the developmental state and the WTO are combined, we
have two very different instances of institutional transformation with quite different
lessons. Both of them are too central to the evolution of the current global political
economy to be ignored by the dominant canon. Yet, in both cases, explanation via
the dominant canon‟s analytical apparatus requires embarrassing contortions, if,
indeed, it can be achieved at all. We have, in short, confronted the existing canon
with anomalies that it can neither ignore nor dispose of easily.
At the same time, exploration of these cases has proved fruitful in terms of refining
and reconstructing the conceptual sketch of institutional dynamics with which we
started. Both cases illustrated our basic premise that an adequate theorization must
see institutions as both constructed (or reconstructed) in response to changes in
interests and ideology (or worldview), on the one hand, and constitutive of interests
and ideology, on the other hand. But, they did more than this. While the cases were
not chosen to illustrate the variant ways in which ideas, interests and institutions
might interact, they ended up serving this function.
In the case of the developmental state, the process whereby social groups that
previously formed integral parts of its political foundations came to view their
interests as lying in its dismantling provides a nice rebuttal of simplistic theories of
interests and institutions. This is most obvious in the case of the bureaucrats who
behaved completely irrationally from the point of a Buchanan/Kreuger/Niskanen view
28
of bureaucratic behaviour by calling for their own disempowerment. Their new “free
market” attitudes cannot be explained without heavy reliance on a shift in worldview,
rooted in turn in new patterns of professional training. The sequence then is one in
which worldview rather than position in the economic structure shapes interest
definitions.
In the case of local entrepreneurs (the chaebols), the logic is more mixed. On the
one and, their objective economic position did shift. Their investments and markets
became increasingly international and so their adoption of an internationally
prevalent anti-statist ideology makes some sense in economistic terms. At the same
time, however, it is important to recognize (as became apparent in the aftermath of
the Asian crises) that their ability to sustain their own growth independently of the
developmental state was, to a significant degree, fictitious. So the shift in their
interests was also inseparable from a shift in worldview. The irony here is, of course,
that the shift in both worldview and interests was made possible by the success of
the developmental state as an instrument of economic transformation. Thus, prior
institutional change can be considered to underlie changes in interests and ideas.
The case of the political leadership is also complex. On the one hand, the new
generation of political leadership had an ambivalent relation to the developmental
state from the beginning, not because of its aggressive pursuit of economic
transformation but because of its authoritarian and repressive face. At the same
time, they saw the developmental state as guilty of unduly concentrating economic
power in the hands of a few chaebols. Despite these ambivalences, it is clear that
their abandonment of the pro-producer, nationalist elements of the economic policy
of the developmental state must be explained to a large extent in terms of their
adherence to a global free-market worldview. This adherence might, of course,
represent an interest-based conformity founded on fear that nationalist policies
would bring punishment by international financial markets, but the extent of the overconformity suggests an irreducible element of ideological conversion.
In sum, the developmental state‟s loss of political support best fits a model in
which changing worldviews, more specifically the adoption of the globally dominant
worldview on the part of local elite, was more important than shifts in their “objective”
economic interests in generating institutional change which had negative
consequences for economic performance (i.e., contributing to the creation of the
Asian crisis) and, therefore, negative consequences for the “objective interests” of
the key actors who formulated and implemented the decline of the developmental
state.
The WTO case is not inconsistent with the developmental state case but it
emphasizes a different sequence. Again, worldview plays a dominant role in
generating institutional change (in this case, the sophisticated internationalist
Soros/Rubin worldview that recognizes the necessity of creating institutions to
govern global markets). Likewise, in the event that the current project of global
institution-building collapses, conservative ideologies which exalt the privileges of
sovereignty and the short-term advantages of bilateral bullying are likely to play a
major role.
The main part of the story, however, leads from the creation of an institutional
context to the subsequent redefinition of interests and worldview, with the added
twist that the institutional effects are fully decoupled from the intentions of the
institution‟s creators. Concretely, the creation of the WTO provides a stimulus for the
29
redefinition of labour‟s interests and worldview in an internationalist direction. This
change in worldview and interest definition on the part of a significant set of social
actors is, in turn, projected to shift the way that the WTO functions as an institution in
the future, and thereby the way in which legitimate global markets are defined.
Our analysis also strongly reinforces Block‟s (1999) admonition that it is a grave
mistake to think of the global political economy as a “natural” system in which each
element is logically and “organically” connected to the others so that tinkering with
any part of it will disrupt the functioning of the whole. We have tried, as Block (1999,
p. 10) suggests, to “reconceptualize international capitalism as a constructed
system.” We have shown how the rise and demise of the developmental state
reflected a complex process of individual agency, changing worldviews and shifting
political alliances, not some “inexorable economic logic” of the global system as a
whole. The WTO demonstrates even more clearly the extent to which the global
political economy is a system under construction with the economic logic of the
resulting system dependent on the outcome of the process of institution building.
The juxtaposition of the two cases also illustrates the benefits of thicker
institutional analysis. Obviously, the emergence of the WTO and the decline of the
developmental state take place in the same global arena. Thin institutional analysis
often sees their interrelation is simple “zero-sum” terms – as a competition over a
fixed amount of total sovereignty in which increasing global governance is locked in
struggle with the national economic strategies of Third World governments. Our
analysis suggests a very different picture. The complicated political dynamics of the
decline of the developmental state had little to do with governments being forced by
the WTO or other global governance organizations to give up nationalist political
strategies. Conversely, among the myriad threats to the institutionalization of the
WTO, the nationalist economic policies of Third World governments hardly feature.
The implications of our analysis for the inter-relation of the two cases reinforce the
basic point: thin institutional approaches lead to misleading conclusions regarding
institutional dynamics.
The overall point is clear. Our analysis illustrates the reasons for our discontent
with the dominant canon. The false parsimony of its non-institutional view offers little
or no analytical leverage on the dynamics of either case. Its basic assumptions
prevent it from doing so. “Preferences” (both in the sense of interests and
worldviews) must remain exogenous and unchanging. A story in which interests and
worldviews are variables shaped by institutional context but also playing a role in
causing institutional change is impossible. False parsimony has robbed the canon of
its ability to deal with these key cases.
Unfortunately, when it comes to explaining economic change, it will take more
than an intellectually plausible overall framework combined with superior ability to
explain particular cases, even very important cases, to displace the institutionally
anaemic, dominant approach.
In addition to the “QWERTY” sort of “path dependency” advantages that the
dominant canon has, simply on the basis of longevity and “network effects,” the
nature of the coupling between theory and practice gives the particular kind of false
parsimony that the dominant canon has developed a tremendous advantages.
Powerful social actors care much too intensely about getting clear answers delivered
with full conviction to tolerate the kind of complexity that an adequate institutional
explanation involves. Theories must generate simple rules that enable decision30
makers to take prompt action. They must also generate confidence among the
decision-makers and ideological hegemony vis-à-vis the rest of society.
Elegant, parsimonious theories whose basic premises are at one with the existing,
taken-for-granted assumptions of powerful social actors (and to a lesser extent of
society at large) and which can also claim broad applicability provide powerful
ideological support as well as clear bases for action. Such theories may be
incomplete, or wrong, but until the decision-making rules they generate are clearly
connected to obviously disastrous outcomes, those rules will prevail. The prevalence
of the rules in turn reinforces the legitimacy of the theory, since knowledge of the
theory enables prediction of a broad set of important decisions (which are based
precisely on the theory), and makes the theory‟s predictions to some extent selffulfilling.
Of course, two additional conditions are also crucial to making rules “hegemonic”.
First, the decisions they produce should not imply sacrifice or discomfort to the
decision-makers themselves or their most politically powerful constituents. Second,
the theories on which they are based should work reasonably well in simple contexts
(say short-term microeconomic decision-making in firms) that are salient and valued
by decision-makers. As long as these two conditions are met, the contexts in which
the theories are applied are likely to be extended indefinitely, despite obviously
inconsistencies or illogic and even though their application may lead to immediately
deleterious outcomes for the less powerful and raise the risk of crisis and disaster for
the decision-makers themselves in the long run.
The contemporary economic canon enjoys all the necessary conditions for
sustaining false parsimony and under current conditions it is unlikely to be unseated
by a complex and “mushy” institutionalist alternative. Even if an institutionalist
alternative could unequivocally demonstrate its scientific superiority, the practical
and ideological costs of changing decision-rules would militate against jettisoning the
established canon. And, an institutional alternative is still a long way from such
unequivocal demonstrations.
To improve its chances, a more institutionally-oriented alternative canon must do
two things. First, it must continue to demonstrate that events that are anomalous for
the existing canon become comprehensible and predictable once a more
institutionalist view is applied. Given the ambiguities inherent in most social and
political outcomes, this is not an easy task, but it is still essential. Second, while
eschewing false parsimony, an institutionalist approach must still work in the
direction of showing that its explanations are not simply ad hoc stories concocted
after the fact but are consistent with each other and with some body of general
propositions. This is even harder.
Despite the difficulties involved, the prospects for the rise of an alternative,
institutionalist view are not as bleak as this discussion makes them appear. First,
conquest is not the only form of success. Just as religious dogmas transform
themselves by assimilating oppositional positions without admitting that the previous
orthodoxy was ever in error, intellectual canons can be substantially transformed
without ever appearing to capitulate. Positions that might have seemed blasphemous
thirty years ago – e.g. the important role of increasing returns – are already accepted
by the more innovative practitioners of the conventional canon. Such changes create
useful building blocks for the construction of an alternative canon.
31
At the same time, the aim is certainly not to “reinvent the wheel.” Manufacturers
trying to calculate the costs of making widgets in a given organizational and
institutional need the kinds of tools that standard microeconomics has developed.
We also need to take advantage of the immense amount of work that has been put
into techniques of calculating national incomes, estimating changes in the money
supply etc.. It would be foolish not to take advantage of all the work that has been
done on these issues under the aegis of the conventional paradigm. Such tools
become misleading because they are used without the acknowledgement of their
institutional assumptions. The problem with conventional economics is that it would
prefer to ignore the fact that changes in the institutional context are both possible
and can dramatically change the implications of the numbers they interpret.
As North and others have pointed out, it is precisely the “taken for granted”
character of institutions that makes them invaluable to individuals and societies that
don‟t have the time or ability to optimize. It would be foolish to suggest that
consideration of the full range of institutional alternatives should be a part of all dayto-day decision-making. Nonetheless, ongoing preoccupation with the question “How
might existing institutions be organized differently and what would happen if they
were?” is not just healthy but essential. The current hegemony of the dominant
canon cuts off that question and that is what makes it dangerous.
Both an accurate assessment of the possibility that an institutional perspective
might gain more sway and a strategy for achieving such an end must obviously
depend on political as well as intellectual factors. The ascendance of an alternative
canon is unlikely to happen in isolation from the mobilization of social actors that see
their interests harmed by the policies generated by the dominant canon. Thus,
anyone interested in the intellectual project of developing an alternate canon must be
equally interested in the political project of empowering those most prejudiced by the
logic of the existing canon.
There is, of course, an uglier scenario for the creation of a political base for new
ideas – a traumatic economic crisis. A sufficiently profound practical crisis would rob
the existing canon of its ideological charisma, but it would wreak havoc in the lives of
everyone (not just the privileged). Those who would like to unseat the existing canon
should hope that this kind of occasion for their success never arrives, which is not to
say that aversion to a traumatic crisis should diminish enthusiasm for working toward
the construction of an alternative canon. First of all, infusing existing policy debates
with some alternative perspectives is probably the best way to diminish the
possibility of such a crisis. Second, if a crisis cannot be avoided, the worst of all
possible worlds would be to have the existing canon stumble and fall into crisis with
no better alternative waiting in the wings to replace it. Anyone who really believes
that the false parsimony of the existing canon has crippled its ability to understand
and predict economic change had better be working furiously to construct an
alternative view, not because they wish for crisis but because they are terrified of
what crisis would mean in the absence of a sound intellectual basis for formulating
alternative strategies.
References
Alchian, A. (1950) “Uncertainty, Evolution, and Economic Theory”, Journal of Political
Economy, vol. 58: pp. 211-22.
32
Amsden, A. (2000) “Ending Isolationism”, Dissent, Spring, 2000: 13-16.
Amsden, A. (1989) Asia's Next Giant: South Korea and Late Industrialization. New
York: Oxford University Press.
Amsden, A.(1991) “The Specter of Anglo-Saxonization is Haunting South Korea” in
L. Cho and Y. Kim (eds.), Korea’s Political Economy – An Institutionalist
Perspective, Boulder: Westview Press.
Amsden, A. and Y. Euh (1990) “Republic of Korea's financial reform: What are the
lessons?”, Discussion Paper, no. 30, United Nations Conference on Trade and
Development (UNCTAD), Geneva.
Armstrong, P., A. Glyn, and J. Harrison (1991) Capitalism since 1945. Oxford:
Blackwell.
Aston, T. and C. Philpin (eds.) (1985) The Brenner Debate – Agrarian Class
Structure and Economic Development in Pre-Industrial Europe, Cambridge:
Cambridge University Press.
Barnett, M. and M. Finnemore (1999) “The Politics, Power and Pathologies of
International Organizations”, unpublished manuscript.
Blackhurst, R. (1997) “The WTO and the Global Economy”, World Economy, 20:
527-544.
Block, F. (1999) “Deconstructing Capitalism as a System”, a paper presented at the
symposium on “Approaches to Varieties of Capitalism”, held at University of
Manchester, March, 1999.
Bowles, S. and H. Gintis (2000, forthcoming) “A Future for Victorian Economics?”,
Quarterly Journal of Economics
Bowles, S. and H. Gintis (1996) “Efficient Redistribution: New Rules for Markets,
States, and Communities, Politics and Society, 24(4).
Bowles, S. and H. Gintis (1993) “The Revenge of Homo Econmicus: Contested
Exchange and the Revival of Political Economy”, Journal of Economic
Perspectives, 7(1).
Brenner, R. (1976) “Agrarian Class Structure and Economic Development in Preindustrial Europe”, Past and Present, February, vol. 70.
Buchanan, J., R. Tollison, and G. Tullock (eds.) (1980) Towards a Theory of the
Rent-Seeking Society, College Station, TX: Texas A&M University Press.
Chang, H-J. (2000a, forthcoming) “An Institutionalist Perspective on the Role of the
State – Towards an Institutionalist Political Economy” in L. Burlamaqui, A. Castro
and H-J. Chang (eds.), Institutions and the Role of the State. Aldershot: Edward
Elgar.
Chang, H-J. (2000b, forthcoming) “Breaking the Mould – An Institutionalist Political
Economy Alternative to the Neo-Liberal Theory of the Market and the State”,
mimeo., Faculty of Economics and Politics, University of Cambridge, forthcoming in
Cambridge Journal of Economics in 2002.
Chang, H-J. (2000c). “The Hazard of Moral Hazard – Untangling the Asian Crisis”,
World Development, vol. 28, no. 4.
33
Chang, H-J. (1999) “Industrial Policy and East Asia: The Miracle, the Crisis, and the
Future”, a paper presented at the World Bank workshop on “Rethinking the East
Asian Miracle”, San Francisco, 16-7 February, 1999.
Chang, H-J. (1998) “Korea: The Misunderstood Crisis”, World Development, vol. 26,
no. 8.
Chang, H-J. (1997) “Markets, Madness, and Many Middle Ways - Some Reflections
on the Institutional Diversity of Capitalism” in P. Arestis, G. Palma, and M. Sawyer
(eds.), Essays in Honour of Geoff Harcourt - volume 2: Markets, Unemployment,
and Economic Policy, London: Routledge.
Chang, H-J. (1995) “Explaining „Flexible Rigidities‟ in East Asia” in T. Killick (ed.),
The Flexible Economy, London: Routledge.
Chang, H-J. (1994) The Political Economy of Industrial Policy, London and
Basingstoke: Macmillan.
Chang, H-J. (1993) “The Political Economy of Industrial Policy in Korea”, Cambridge
Journal of Economics, vol. 17, no. 2.
Chang, H-J., H-J. Park. And C. G. Yoo (1998) “Interpreting the Korean Crisis:
Financial Liberalisation, Industrial Policy, and Corporate Governance”, Cambridge
Journal of Economics, vol. 22, no. 6.
Chang, H-J. and R. Rowthorn (1995) “Role of the State in Economic Change –
Entrepreneurship and Conflict Management” in H-J. Chang & R. Rowthorn (eds.),
The Role of the State in Economic Change, Oxford: Oxford University Press.
Chang, H-J. and C. G. Yoo (2000) “The Triumph of the Rentiers?”, Challenge,
January/February, 2000.
Cheng, T., S. Haggard and D. Kang (1998) “Institutions and Growth in Korea and
Taiwan: The Bureaucracy”, Journal of Development Studies, vol. 34, no. 6.
Chibber, V. (1999) “Building a Developmental State: The
Reconsidered”, Politics and Society, vol. 27, no. 3.
Korean
Case
Douglas, M. (1986) How Institutions Think, London: Routledge and Kegan Paul.
Evans, P. (2000) “Counter-Hegemonic Globalization: Transnational Networks as
Political Tools for Fighting Marginalization,” Contemporary Sociology
29(1)[January].
Evans, P. (1997) “The Eclipse of the State? Reflections on Stateness in an Era of
Globalization” World Politics 50, 1, 62-87.
Evans, P (1995) Embedded Autonomy: States and Industrial Transformation.
Princeton, NJ: Princeton University Press.
Evans, P. and J. Rauch (1999) “Bureaucracy and Growth: A Cross-National
Analysis of the Effects of „Weberian‟ State Structures on Economic Growth,”
American Sociological Review. 64(5) [October]:748-765.
Finnemore, M. (1996) “Norms, Culture, and World Politics: Insights from Sociology's
Institutionalism”, International Organization 50 (2): 325-47.
Fligstein, N. (1996) "Markets as Politics: A Political-Cultural Approach to Market
Institutions," American Sociological Review. 61[August]:656-673.
34
Friedland, R. and R. Alford (1991) “Bringing Society Back In: Symbols, Practices,
and Institutional Contradictions” in W. Powell & P. DiMaggio (eds) The New
Institutionalism in Organizational Analysis, Chicago: The University of Chicago
Press.
Granovetter, M. (1985) "Economic Action and Social Structure: The Problem of
Embeddedness" American Journal of Sociology 91(3):481-510.
Haworth, N. and S. Hughes (1997) “Trade and International Labor Standards: Issues
and Debates over Social Clause,” The Journal of Industrial Relations, 39(2): 179195.
Hodgson, G. (2000) “Structures and Institutions: Reflections on Institutionalism,
Structuration Theory and Critical Realism”, mimeo., The Business School,
University of Hertfordshire.
Hodgson, G. (1988) Economics and Institutions. Cambridge: Polity Press.
Hodgson, G. (1993) Economics and Evolution. Cambridge: Polity Press.
Hveem, Helge (1999) “A New Bretton Woods for Development?”, Journal of
International Relations and Development, 2(4).
Johnson, C. (1982) MITI and the Japanese Miracle. Stanford, CA: Stanford
University Press.
Keck, M. and K. Sikkink (1998) Activists Beyond Borders: Advocacy Networks in
International Politics. Ithaca, NY: Cornell University Press.
Kohli, A. (1994) Where Do High Growth Political Economies Come From? – The
Japanese Lineage of Korea‟s „Developmental State‟, World Development, vol. 22,
no. 9, pp. 1269-93.
Kregel, J. & Burlamaqui, L. (2000) Finance , Competition, Instability, and
Developmen: The Financial Scaffolding of The Real Economy, paper presented to
meetings of the “Other Canon” Group, Venice, 13-14 January, 2000, and Oslo,
August 15-16, 2000.
Krueger, A. (1998) The WTO as an International Organization.
University of Chicago Press.
Chicago, IL:
March, J. and J. Olsen (1989) Rediscovering Institutions – The Organizational Basis
of Politics, New York: The Free Press.
Marglin, S. (1974) “What Do Bosses Do? – The Origins and Functions of Hierarchy
in Capitalit Production”, Part I, Review of Radical Political Economics, vol.6, no. 2.
Marglin, S. and J. Schor (eds.) (1990) The Golden Age of Capitalism. Oxford: Oxford
University Press.
North, D. (1984) “Transaction Costs, Institutions, and Economic History”, Journal of
Institutional and Theoretical Economics, no. 140.
Palley, T.I., E. Drake and T. Lee (1999) “The Case for Core Labor Standards in the
International Economy: Theory, Evidence, and a Blueprint for Implementation”, A
Report submitted to the International Financial Advisory Commission of the
Department of the Treasury, Washington, DC: AFL-CIO.
Polanyi, K. (1957 [1944]) The Great Transformation. Boston: Beacon Press.
35
Rauch, J. and P. Evans (2000, forthcoming)
“Bureaucratic Structures and
Bureaucratic Performance in Less Developed Countries,” Journal of Public
Economics.
Ruggie, J. (1998) Constructing the World Polity: Essays on International
Insitutionalization. New York: Routledge.
Ruggie, J. (1982) “International regimes, transactions and change: embedded
liberalism in the postwar economic order,” International Organization, 36(2)[Spring]:
195-231.
Schotter, A. (1985) Free Market Economics – A Critical Appraisal, New York: St.
Martin‟s Press.
Simon, H. (1983) Reason in Human Affairs, Oxford: Blackwell.
Singh, A. (1999) “Asian Capitalism” and the Financial Crisis in J. Michie & J. Grieve
Smith (eds.), Global Instability – The Political Economy of World Economic
Governance. London: Routledge.
Stretton, H. and L. Orchard (1994) Public Goods, Public Enterprise and Public
Choice, Basingstoke, Macmillan.
Wade, R. (1998) “The Asian Debt and Development Crisis of 1997- ?: Causes and
Consequences,” World Development 26(8): 1535-1553.
Wade, R. (1990) Governing the Market: Economic Theory and the Role of
Government in Taiwan's Industrialization. Princeton, NJ: Princeton University
Press.
Waltz, K. (1979) Theory of International Politics. Reading, MA: Addison-Wesley.
Weber, S. (1999) “Ethics, Actors, and Global Economic Architecture – What is the
role of International Organizations?”, Discussion Paper for Carnegie Council
Workshop, June 1999.
Williamson, O. (1985) The Economic Institutions of Capitalism. New York: The Free
Press.
Woo-Cumings, M. (ed.) (1999) The Developmental State. Ithaca, NY: Cornell
University Press.
World Bank (IBRD) (1997) World Development Report: The State in a Changing
World. New York: Oxford University Press.
World Bank (IBRD) (1993) The East Asian Miracle: Economic Growth and Public
Policy (A World Bank Policy Research Report) New York: Oxford University Press.
36