By Mauricio Mesquita Moreira
This booklet demanding situations the tested, neoclassical view of commercial luck in constructing international locations. by means of re-examining the function of presidency intervention within the industrialization of Brazil and South Korea, it seeks to teach that the major to commercial luck doesn't lie in an easy mixture of outward-orientation and laissez-faire, yet within the government's luck in remedying the most important marketplace mess ups within the product and issue markets.
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Additional info for Industrialization, Trade and Market Failures: The Role of Government Intervention in Brazil and South Korea
The former takes up the characteristics of the trade regime, which form the basis of the neoclassical version of the events, and the latter deals with the policies towards conglomeration and foreign direct investment (FDI). We then move on to the factor markets and cover the financial, human capital and science and technology (S&T) policies. Intervention in the Product Markets The Trade Regime The first three years of the military government are usually seen as a transitional period, when moves to reform the trade regime would have been somewhat compromised by the macroeconomic imbalances provoked by an ill-advised expansionary policy.
Market Failures in the Factor Markets So far we have assumed that factor markets work perfectly in LDCs. This, however, is a heroic assumption that often leads to the neglect of crucial obstacles to a successful late industrialization. These obstacles stem from major failures in the markets for finance, human capital and technology. These failures imply that intervention in the product markets is bound to have limited success, unless factor markets are also taken into account. Here, we agree with 'the neoclassical principle that, 'Interventions should attack the problem of market failure nearest to its source' (World Bank 1987a:70).
Both product and factor markets in LDCs are affected by important imperfections, which outward-orientation or 'keeping the fundamentals right', by themselves, are not likely to remedy, and that free-trade and inward-orientation are likely to aggravate. Outward-orientation, though, is important and necessary, not only because it brings the benefits of an open economy, but also because it guides and disciplines governments towards selective interventions, designed to remedy specific failures, or to make the best use of irreparable imperfections.