Historical Constraints

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In devising economic policy, leaders do face certain constraints in the broad historical forces that have shaped their countries’ social and institutional structures. However, it is difficult to say that leaders are solely constrained by the historical factors and cannot ignore nor harness the historical factors to achieve economic and political goals. Throughout history, we have witnessed that leaders have been able to devise and implement economic policy despite the constraint of historical forces as well as cases in which they faced constraints.
Acemoglu and Robinson (2012) argue that nations fail due to politics and path-dependent ways, but inclusive economic institutions lead to economic growth. The authors try to explain the factors
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In Taiwan’s case, it was institutionally prepared to govern the market by having the National Resources Commission to lead industrial development under Chiang Kai-shek. For the developmental states, embedded autonomies were carried out by strong government technocratic elites. For example, the Ministry of International Trade and Industry (MITI) was the driver of the export-led industry in Japan and spearheaded economic growth. Contrary to the developmental states, Latin American countries that failed in import-substitution industrialization and did not go through the developmental state phase are still lagging …show more content…
An illustrative example is the comparison between the two Koreas. While North Korea has continued to persist its authoritarian rule and closed economy, South Korea was able to transform itself from a developmental state and eventually a democratic one with significant economic growth. Even though the Korean peninsula initially shared the same history and geography, it can be said that the difference between the two Koreas due to the different institutional trajectories (Acemoglu & Robinson, 2012). During the developmental state under the Park Chung-hee regime in the 1960s, South Korea started adopting industrial policies with five-year development plans and export-oriented industrialization. The strong authoritarian leadership of President Park was able to succeed since economic and political institutions were unstable at the time and due to his ineffective predecessor, Syngman Rhee. This was a time of economic turmoil after the Korean War (1950-1953), and the country was in desperate need of a charismatic leader who could bring the country out of poverty. Given the circumstances, South Korea’s developmental state was able to achieve exponential economic growth despite its historical forces. Moreover, South Korea has further experienced economic liberalization with the advent of democracy in the late 1980s and its economy grew

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