Industrial Policy for Economic Development: Lessons from South Korean Experience

Abstract

Enthusiasm for industrial policy as a means of sure and rapid economic development needs to be tempered by a careful study of events. Upon scrutiny, the experience of rapid economic development of South Korea in the 1960s and 1970s reveals that the oft-cited anecdotal evidence for the efficacy of industrial policy is open to more sobering interpretations, that the framework of economic development in Korea was created not so much by planning but as a result of political processes which created the ruling elites whose interests were not inconsistent with economic development, that the political changes coincided with many favorable circumstances, that when industrial policy was tried in earnest it failed miserably, that Korean economic development is not particularly spectacular when compared to other Pacific Rim countries that had a less heavy-handed approach, and that increasing numbers of Koreans realize that a free market approach may be the most effective ‘industrial policy’.