35
Further Mechanisms of Success

The discussion has hopefully so far made some sense of the first two stylized facts of Chapter 31. The extensive state intervention obeys a sound economic logic--provided one is willing to buy the basic assumptions of externalities. However, what has been said hitherto should apply to almost any small economy. What has made the four countries successful? Why have the states been willing and capable to act in ways conducive to success? This section discusses stylized facts 3-6 and suggests at least some ways in which they may have contributed to good performance.


35.1 Stylized fact 3: extensive planning but abstention from a planned economy as a system choice

The third observation was that an extremely étatist and interventionist policy has coexisted with a commitment, of ultimate principle, to respect the right to private property and not to proceed towards a socialist planned economy. This is an issue that the economic discussion on planning versus markets has failed to appreciate fully. The question of whether 'planning can work' or not may depend crucially on whether it is attempted as a temporary way of organizing a transition towards a modern market economy or as a fundamental 'system' solution. In the former case, which is the one of all our case countries, the prospective entrepreneur can count on the system's commitment to keep the incentives of private entrepreneurship alive. In such a situation, even extensive and direct administrative interference might be tolerable in his eyes. In the latter case, the prospect of being able ever to recover the returns of today's investments is poor, and the environment for entrepreneurship is wrought with much more uncertainty.

Thus, basic political commitments may be as important as specific policies. Paradoxically, a regime that is fundamentally

-222-

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