Differences in the economic development of South Korea and Taiwan, 1960-1988

Despite the worldwide economic slowdown, South Korea and Taiwan achieved remarkable growth during the 1980s. They both began industrialization under similar conditions, pursued similar development strategies, and used government intervention to help achieve goals.; In spite of these similarities, in managing their respective economic affairs, one important difference existed in the growth pattern between these two countries. In Taiwan, the phase of economic management was fairly uniform throughout 1960-1988, while in South Korea there were two distinctive phases. The government of South Korea played a large role in the economy during the 1960s and 1970s, but since then it has shifted to relying more on market forces.; The implication of this managing policy change on South Korea's economy and comparison of the differences in the growth path of the GNP between the two, are investigated by analyzing the Coefficient of Variation figures as derived from sequences of GNP, and the fluctuations in the growth pattern of both countries. Policy intervention can help government reach certain development goals. However, as market conditions change, policy intervention can become counterproductive or obsolete in economic restructuring and adjustment; it can be accompanied by undesirable distortions and imbalances which affect growth and economic stability.; Macroeconomic performance has improved in South Korea since market forces have been given more relevance. In the early period of industrialization, Taiwan used state controls to a smaller degree. However, Taiwan's performance has deteriorated during the 1980s relative to its past because the government failed to liberalize as much as it should have. This may be one reason for Taiwan's slower growth compared to South Korea's since the early 1980s. Political and other factors unique to each country help explain these differences.; As a manifestation of the extent of the government's involvement in economic policy, the machine tools industry is investigated as a special case study to compare the role played by each of the two countries. This study is also concerned with policy instruments used in developing various strategic industries.