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Comment

VILLY BERGSTRÖM

Microeconomic theory defines a narrow scope for government activity. It is confined to the supply of collective goods and interventions to correct, for example, externalities or monopolies due to increasing returns in production. A curious result of this micro theory is that this view of government often becomes a normative or ideological opinion among economists. Government should not do more than what can be motivated by the activities of 'the night watchman state', to use a Swedish phrase. In reality government activities cover a wide range. Governments supply private goods, they intervene in the distribution of incomes and in the function of markets without any existence of externalities.

Juhana Vartiainen's paper is an attempt at a realistic study of government involvement in economic life by studying four countries that were industrialized after World War II. Vartiainen finds that these four successfully industrialized countries have some traits in common: a strong state, an effective, uncorrupted bureaucracy, co-operation between state and capital, sometimes involving organized labour (corporatism) and a threatened international position between great powers.

By analysing a two-sector model of production and consumption, Vartiainen demonstrates several cases when decentralized market solutions are inferior to (benevolent) state planning or corporatist (co-operative) solutions with or without government intervention. These are principal results that are not extensively used when the four country cases are discussed. In fact, there is, in my opinion, too little specific information about how the successful industrialization got started and continued in the four countries analysed by Vartiainen.

In the case of South Korea, for instance, I have heard Korean economists describe in detail how the state involvement in

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