Korean Model

By Ramesh Akkineni
from an article by Ha-Joon Chang in the Guardian
In my lifetime Korea has lived through one of the greatest development miracles – half a century ago, its annual per capita income was around £50, less than half that of Ghana at the time. Today, it stands at £12,000, putting it on a par with Portugal and Slovenia. How was this possible?

Korea of course did things that most people agree are important for economic development, such as investment in infrastructure, health and education. But on top of that, it also practised many policies that are now supposed to be bad for economic development: extensive use of selective industrial policy, combining protectionism with export subsidies; tough regulations on foreign direct investment; active, if not particularly extensive, use of state-owned enterprises; lax protection of patents and other intellectual property rights; heavy regulation of both domestic and international finance.

The Korean experience shows that sustainable export success over a long period of time, for which the country is justly famous, requires protection and nurturing of "infant industries" through selective industrial policy, rather than free trade and deregulation.

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