Governing the Market [Paperback]

Robert Wade (Author)

Book Description

Publication Date: February 4, 1992

Why have not just Japan, but also Taiwan and South Korea, been so successful in economic development? This book rejects the claims both of those who see the East Asian story as a vindication of free market principles, and of those who say it all resulted from government intervention. What needs attention, the author maintains, is the way allocation decisions were divided between markets and public administration and the synergy between them. He focuses on Taiwan, with comparisons to Korea, Japan, and Hong Kong. "This new study by Robert Wade is one of only a handful that describes how economic policy in East Asia has actually worked.... A superb book.... Governing the Market demystifies East Asia's miracle without making it seem any less remarkable. It assaults idle prejudice on every side of the debate about markets and the role of government. It is long overdue, and deserves to be widely read".--The Economist "This valuable book provides a quite detailed and carefully analytical account of the economic development of Taiwan and its political and social setting.... [Wade] makes a good case for his view that while market forces, at home and abroad, have been given much play, the government has also played a key part".--Foreign Affairs

Editorial Reviews

Review

This valuable book provides a quite detailed and carefully analytical account of the economic development of Taiwan and its political and social setting. . . . [Wade] makes a good case for his view that while market forces, at home and abroad, have been given much play, the government has also played a key part. -- Review

About the Author

Robert Wade is Professor of Political Economy at the London School of Economics. He has a long-standing interest in the causes of economic growth and economic inequality on a world scale and has conducted field research in Pitcairn Island, Italy, India, South Korea, Taiwan, and the World Bank. He worked earlier as an economist in the World Bank and in the Office of Technology Assessment (U. S. Congress). --This text refers to an alternate Paperback edition.

Product Details

• Paperback: 456 pages
• Publisher: Princeton University Press (February 4, 1992)
• Language: English
• ISBN-10: 0691003971
• ISBN-13: 978-0691003979
• Product Dimensions: 9.2 x 6.2 x 1.1 inches
• Shipping Weight: 1.5 pounds
• Average Customer Review: 5.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #1,736,302 in Books (See Top 100 in Books)

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2 of 2 people found the following review helpful:

5.0 out of 5 stars Brilliant Study in Heterodox Economic Growth Theory, October 26, 2009

By 

Rufus Burgess (San Francisco, CA) - See all my reviews
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This review is from: Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Paperback)

Robert Wade's 'Governing the Market' is a landmark text in development economics. Southeast Asian Tigers are often used to describe the success inherent through trade and market liberalization. What Wade discovers is that this finding is only skin deep. The economic policies of all the Tigers were far from 'free' and often manipulated the market to focus on total production rather than marginal efficiency.

Wade focuses on Taiwan (with comparisons to Japan and South Korea). Taiwan developed a dualistic economy where most of the businesses (~70%) were small firms that operated on a relatively free market. However, the rest of the economy (which accounts for most of the countries production) were highly regulated and controlled by government intervention. Taiwan's government led the market by coercing private firms into investing in new industries that were deemed economically viable. When a private firm would not step in the government went ahead and formed their own public enterprises (which account for a large part of Taiwan's economy). Through highly selective use of import-substitution and export-promotion strategies the economy flourished with unprecedented growth.

The other Tigers followed a similar path as Taiwan, South Korea, and Japan but without selective development policy. This is predominantly why they had lower growth rates. Even Hong Kong, the neoliberal bastion of success, turns out to be a highly regulated economy (p331-333 is essential reading).

Wade comes to a disturbing conclusion: Benevolent authoritarian rule may be necessary for developing nations to thrive. Without authoritarian corporatism it may be very difficult for growth to occur.

The 2003 version is highly preferred to the original because of a new, comprehensive, introduction. The introduction gives a response to critics of 'Governing the Market' and a thorough explanation of the Asian Financial Crisis. The introduction alone is worth the price of most texts.

I highly recommend this to anyone interested in economic growth theory.

2 of 2 people found the following review helpful:

5.0 out of 5 stars Classic on the taiwanese developmental state, August 13, 2008

By 

S. Morgan (Rochester, NY USA) - See all my reviews
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This review is from: Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Paperback)

"Governing the Market" is almost certainly the seminal work on Taiwan's economic development. The work gives a detailed account of the ways in which state intervention actively promoted economic growth, contrary to the protestations of the IMF-led "Washington Consensus". Rather than focusing on polemical argument, as is so often the case in political economy, Wade's study is extremely detailed and persuasive, explaining both the economics, but also the politics of corruption (and how even corruption can be harnessed into economic productivity).

Personally, I think Wade may have underestimated the importance of widespread education, effective infrastructure, and significant quantities of US aid compared with other parts of the developing world as "lubricants" to jump-starting the economy. Nevertheless, his argument that the state-imposed redistribution of agricultural land went a long ways to generating the necessary surplus for development is solid. Wade also recognizes that this surplus was then harnessed by a government savings-and-loan structure that facilitated capital investment in domestic heavy industry (the "commanding heights" of the economy) - often a difficult task to accomplish. As Wade convincingly contends, there was a significant amount of East Asian-style Fabian socialism involved in Taiwan's development - and the Taiwanese were remarkably successful because of it - despite some of the roadbumps encountered by others who tried to replicate the model (the quasi-successful states of SE Asia: Malaysia, Thailand, and Indonesia).

The first 150 pages of this volume and the conclusion, at minimum, are a must-read for any serious student of developmental economics or political economy. This edition is especially useful because the introduction convincingly addresses claims that rent-seeking led to the 1997-8 crisis with substantial evidence (supported by even conservative economists like Jagdish Bhagwati at Columbia) that excessive portfolio liberalization in the real estate sector was the leading cause of the 1997-8 crash - and even accounting for this, Taiwan and South Korea each recovered remarkably well in a short period of time, and have now joined the ranks of the first world.