THE POLITICAL ECONOMY OF INDUSTRIALIZATION : A COMPARATIVE STUDY OF SOME DEVELOPING COUNTRIES

Abstract

The objectives of this academic exercise are, firstly to study what are the political and economic factors that go into the formulation of industrial related policies. Next, this academic exercise examines and compares the industrialization process in Korea, India and Malaysia, with respect to both political and economic factors. A theoretical framework that encompasses both political and economic factors is developed. The framework suggested that industrial policy is the result of the synthesis of the policy making process and the settlement between the economic, political md social factors. Factors identified that are central to the framework are, ethnicity, leadership will and goals, state autonomy, external factors and economic factors that initiated the need to formulate new policies. In the analysis of the countries' industrial strategies, the different phases of industrialization are identified first , the framework is then applied to examine the factors that influenced the formulation of the policies. A comparison is then made with the other countries that was already examined with respect to the factors that are identified. The results of the analysis suggested that similar industrial strategies, such as inward or outward looking, did not necessarily imply similar factors at work. Korea's import substitution phase under Park, the leader then, was strictly growth-motivated and was a preparatory stage for the next phase of export promotion, while India took import substitution as a mean for her socialistic goals. In Malaysia's case, although infant industry arguments were officially cited, the choice of the type of industries was actually left to the market forces to decide. Malaysia's government action or non-action, in this case, was due to the settlement between the different ethnic groups immediately after independence. Hence, Korea was growth motivated with a foresight for exports , India was socialistic in nature and Malaysia was constrained by ethnic issues. Subsequent analysis of the export promotion and the heavy industrialization phases were consistent with the findings of the earlier import substitution phase. The basic reasons behind the policies were essentially similar in nature to that of the import substitution phase. From the comparisons made and analysis of the industrialization policies of Korea, India and '1.alaysia, certain conclusions are drawn. Korea's industrialization policies were influenced primarily by the strong developmental will of the leaders, with a growth orientated approach. While Malaysia's policies were reflective of the type of settlement that existed in the economy between the different ethnic groups and the state. India was a case where distributional goals took precedence over economic goals. Hence, very different reasons for similar strategies pursued. In addition to the factors mentioned, external factors such as foreign government intervention and the desire to emulate another country , also played important roles in the formulation of policies. In conclusion , the results of the analysis done suggest that, the industrialization process is indeed dependant on factors other than economic factors. this is advocated in the theoretical framework developed, where political and social factors are of paramount importance too. Hence, the study of the political economy of any country is essential when determining what are the factors responsible for the policies formulated.