The Invisible Hand versus the Visible Hand

Abstract

The long-held neoclassical belief was that in free-market forces and laissez-faire lay the economic nirvana. The structuralists challenged it and deified the statist approach. Competitive markets and statism are two imperfect alternatives. The wisdom lies in pragmatically choosing between different combinations of the market and non-market approaches. This is what Korea did with sufficient ingenuity. The integration between the state geared to development goalstal goals and the profit maximizing private sector worked rather well in Korea. The state intervention was non-ideological and based on the economic efficiency criteria. It was seen that interventionist measures was not allowed to stifle. However, there were several striking differences in the manner in which the state intervened in Korea and that in other developing countries. This article delves into the question of what made state intervention so successful in Korea. The Korean experience has several lessons for the LDCs that have not turned in a stellar growth performance.