Korea and the World Economy-Economic Development Experience of Korea and Its Future Policy Agenda

Korea has drawn worldwide attention for its unprecedented economic growth and recent financial crisis. A unique Korean style 'developmental state model ' approach has been often cited as a root cause for both success and failure of the Korean economy. This paper shares similar views with it in principle. It has been analyzed that the government-led economic operations functioned efficiently in the early stages of economic development but created low-efficiency and high-cost economic structure at later stages. For this reason, even before the outbreak of the crisis, the neoclassical principle has been suggested to replace the traditional development model approach. The IMF policy recommendations were also based on the neoclassical doctrine. The main argument of this paper is, however, that extreme neoclassical strategies can not be a successful substitute for the statist model approach in Korea. The so-called 'advanced state model ' approach is suggested instead as an alternative. JEL Classification: O1, O53