Revival industrijske politike: Primer Južne Koreje

Nathan Lane je naredil odlično novo raziskavo “Manufacturing Revolutions: Industrial Policy and Networks in South Korea” o razvojni učinkoviutosti industrijske politike v Južni Koreji. Pokazal je, da je tedanja (sicer vojaška) oblast v 1970-ih s ciljanim razvojnim spodbujanjem posamičnih industrijskih panog uspela ne samo spodbuditi razvoj v ciljanih panogah s statičnimi primerjalnimi prednostmi, pač pa tudi spodbuditi razvoj tudi v drugih, vertikalno povezanih industrijskih panogah. Uspešnost industrijske politike v Južni Koreji, Japonski in Tajvanu – za razliko od podobnih denimo v Latinski Ameriki – je bila ključno odvisna tudi od determiniranosti inštitucij, ki so v razvojno uspešnih državah trdno podpirale ta razvoj. To pa pomeni, da za kaj takšnega potrebujete denimo prosvetljeno diktaturo ali pa vsaj modrega voditelja na čelu trdne politične koalicije.

Ta raziskava v veliki meri diskreditira široko uveljavljeno kritiko industrijskih politik v mainstream ekonomski vedi zadnjih desetletij, ki je kljub empirični neosnovanosti kritike, svarila pred ciljanjem (“cherry-picking”) posameznih panog – češ da je trg bolj učinkovit pri izbiri propulzivnih panog in da država z vmešavanjem zgolj ustvarja problem moralnega hazarda. Seveda je ta mainstream ekonomija pozabila, da je industrijski razvoj velike večine OECD držav temeljil prav na državni industrijski politiki in da ameriškega tehnološkega buma po drugi svetovni vojni ne bi bilo brez industrijske politike (v veliki meri zaradi potreb vojne in vesoljske industrije).

Spodaj je uvodni del raziskave.

…In 1973 South Korea transitioned to a military dictatorship and drastically changed their development strategy. I find industries targeted by the regime’s big push grew significantly more than non-targeted industries along several key dimensions of industrial development. These developmental effects persisted after industrial policies were retrenched, following the 1979 assassination of the president. Furthermore, I estimate the spillovers of the industrial policies using exogenous variation in the exposure to the policy across the input-output network. I find evidence of persistent pecuniary externalities like those posited by big push development theorists, such as Albert Hirschman. In other words, I find that South Korea’s controversial industrial policy was successful in producing industrial development, the benefits of which persisted through time and in industries not directly targeted by the policies.

Miracles by nature are mysterious. The forces behind the East Asian growth miracle are no exception. Industrial policy, however, has defined Asia’s striking postwar transformation (Rodrik, 1995). The ambitious development strategies pursued by Korea, Singapore and Taiwan now shape interventions across the world, from South- east Asia to Sub-Saharan Africa (Rodrik, 2005; Robinson, 2010; Lin, 2012). Arguably, industrial policies have since become a ubiquitous feature modern economic devel- opment; with rare exception, every developing country has pursued industrial policy. While early development economists argued these policies were key to structural transformation (Rosenstein-Rodan, 1943; Hirschman, 1958), many others warned of their deleterious consequences (Baldwin, 1969; Krueger, 1990). Nonetheless, few empirical studies have explored the effects of industrial policy on development—and none have addressed their role in Asia’s postwar transformation.

In 1957, Ghana and South Korea had identical national incomes, and South Korea entered the 1960s, corrupt, unstable, and dependent on Western aid. By 1980, the Republic of Korea had undergone an industrial transformation that had taken Western nations over a century to achieve (Nelson and Pack, 1998). How did South Korea evolve from an impoverished, agrarian economy into a modern industrial power? This paper explores Korea’s use of industrial policy: in- terventions intended to shift a nation’s industrial composition to one more favorable for growth than if the economy evolved according to static comparative advantage [Lindbeck (1981); Chang (2003); Noland and Pack (2003); p.10].

I consider a definitive postwar policy, South Korea’s Heavy Chemical and Industry (HCI) drive, 1973-1979. HCI embodied the big push-style policies imagined by development scholars, such as Rosenstein-Rodan (1943), Nurkse (1953) and Hirschman (1958). Moreover, HCI was an infant industry policy: a temporary (six year) intervention meant to incubate Korea’s strategic industries. Korea’s drive was broadly representative of industrial policies used across East Asian economies—and beyond (Vogel, 1991; Young, 1992). Korea copied their policy from Japan, while contemporaries, such as Taiwan, pursued comparable strategies (Cheng, 1990; Cheng, 2001).

Meanwhile, Korea’s big push inspired similar interventions in countries like Algeria, Brazil, Malaysia, and Philippines (Kim et al., 2013; Moreira, 1994; Lall, 1995; Lall, 1996). The mixed results of these policies have only made Korea’s big push more controversial [Kim and Leipziger (1993); p.24].

In studying the consequences of South Korea’s big push, I make three contributions. First, I estimate the effect of industrial policy on short-run industrial development outcomes. I do so by comparing the evolution of targeted and non- targeted manufacturing industries before and after the policy’s announcement. Second, I evaluate the spillovers of the intervention, tracing how the policy propa- gates through the input-output network. I disentangle the effects through forwards and backward linkages, motivating my results using a multi-sector general equi- librium model. Finally, I test whether the effects of the drive persisted after the planning period, both in sectors directly targeted by policy and in those exposed to the policy through linkages.

External politics drove the big push in 1973 and its demise in 1979. Nixon’s sudden withdrawal of U.S. forces from Asia (the so-called Nixon Doctrine) had thrown Eastern allies into a security crisis. Since World War II, South Korea relied on the U.S. to maintain military balance against the North. With U.S. support in doubt, the South was forced to develop their own military-industrial capacity.

Strictly speaking, the U.S. pullout prompted a big push by executive decree, shifting the country’s policy regime from a general export promotion strategy to one promoting a limited set of strategic industries. Key sectors were selected based on military importance and copied from Japan’s earlier industrial strategy (Stern et al., 1995; B.-k. Kim, 2011). Just six years after its announcement, however, the big push died with its general: President Park’s 1979 assassination signaled a de facto end to his cornerstone project.

The historic context of South Korea’s big push allows me to avoid prominent sources of bias that plague studies of industrial policy. The political nature of industrial policy means interventions are often allocated based on elite patronage and special interest politics rather than economic rationality. For instance, subsidies and tariffs regularly go to declining, or “sunset,” sectors, and in the developing world, cronyism steers resources towards projects that defy latent comparative advantage (Harrison, 1994; Rodrik, 2005).

Accordingly, empirical studies often reveal a negative relationship between industrial policies and industrial growth. By contrast, I argue that the big push was implemented under the duress of a security crisis that made rational implementation paramount. Also, I maintain HCI planning selected projects for which Korea possessed a latent comparative advantage.

Korea’s setting suggests an intuitive estimation strategy. I compare changes in industrial outcomes between targeted and non-targeted manufacturing industries for each year before and after the big push announcement. This flexible differences-in- differences strategy uncovers the effect of interventions aimed at promoting sectors in which it has latent comparative advantage. Pre-trends represent a counterfac- tual sectoral structure; absent HCI interventions, industries would have evolved according to their pre-1973 specialization, or static comparative advantage. The post-1973 differences reflect the efficacy of interventions—investment subsidies and trade policy—aimed at allocating resources toward sectors which South Korea had unrealized potential in, or latent comparative advantage.

My preferred estimates show the big push significantly shifted economic activity to capital-intensive industry, a shift which continued after the interventions were retrenched. During and after the HCI-period (1973–1979), targeted sectors grow significantly more than non-targeted sectors relative to pre-treatment levels. The results are robust to various measures of growth and indicators of industrial devel- opment. Importantly, I find evidence of significant improvements in productivity during and after the big push, as shown by measures of factor productivity, exports, and, importantly, output prices. Market entry and employment also increase.

A key argument for industrial policy, however, is that benefits accrue to industries outside of targeted sectors (Hirschman, 1958; Hirschman, 1968; Pack and Westphal, 1986; Grossman, 1990). To see whether this was the case, I estimate the network spillovers of policy by comparing the evolution of non-targeted industries policies positively impacted forward-linked (downstream) industry but negatively impacted backward-linked (upstream) industry. Results suggest industrial policy surprisingly lowered the prices for downstream buyers. On the other hand, HCI trade policies allowed targeted industries to import intermediates and subjected upstream suppliers to import competition. Thus, I provide new evidence that indus- trial policy generates pecuniary externalities, but in ways not fully anticipated by classic developmental theory.

My study speaks to an unresolved debate on the role of industrial policy in economic development. On one side of the debate, an influential descriptive literature has emphasized the role of state institutions and industrial interventions in postwar industrialization (including Johnson, 1982; Wade, 1990; Vogel, 1991; Amsden, 1992; Evans, 1995; Chibber, 2002; Kohli, 2004). This literature highlights the centrality of industrial policy in East Asia’s transformation. Robert Wade (1990) and Alice Amsden (1992), in particular, emphasize that the big push interventions were essential to Korea’s miracle.

Conversely, a large literature in economics criticizes the role industrial policy in economic development (Baldwin, 1969; Krueger and Tuncer, 1982; Lal, 1983; Noland and Pack, 2003). These criticisms are met with little empirical literature on the effect of industrial policy on structural change (Herrendorf et al., 2013). Accordingly, many doubt the role of these interventions in postwar East Asia (Weinstein, 1995; Beason and Weinstein, 1996; Lawrence and Weinstein, 1999). An influential critique of postwar policies is that NICs would have grown more in their absence (Krueger, 1995). Yoo (1990) argues this was the case for HCI in Korea, and Lee (1996) shows evidence that policies may have been detrimental to the industrial development of targeted sectors. (Noland, 2004) further contends that HCI failed to target “leading industries.”

Finally, my study contributes to the literature on the role played by state capacity in economic development (Besley and Persson, 2010; Besley and Persson, 2011; Acemoglu et al., 2015) and the implementation of growth-enhancing policies (Dell et al., 2016). Industrial policy is state action, and thus intimately tied to the quality of government (Rodrik, 1997). Successful interventions require specific bureaucratic capabilities (Johnson, 1982; Evans, 1995; Fukuyama, 2014) and also require political incentive compatibility (Haggard, 1990; Chibber, 2002; Robinson, 2010; Vu, 2010). These conditions are rarely satisfied (Krueger, 1990). Nonetheless, Wade (1990) and Amsden (1992) suggest the strong institutions of South Korea, Taiwan, and Japan underpinned the successful deployment of HCI interventions. State capacity may be a necessary ingredient for executing proper industrial development strategies and thereby fostering economic development.

Vir: Nathan Lane, Manufacturing Revolutions: Industrial Policy and Networks in South Korea, November 2016

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