The paper "Role of Government and Institution in Economic Growth of Korea" is a perfect example of a business case study. Korea is ranked among the world’ s top economic powers in terms of the Gross domestic and seventh in terms of manufacturing of the value-added goods ( Klinz, 2010). It has also achieved a phenomenal growth in its exports which have increased significantly between 1980 and 2007. There are several forces that lead to the reevaluation of the optimal role of the government in the development of the economy (Joan, 2011). The policy-makers and the economists did come to the realization that the growth in performance of most of the developing countries that were happening in the 1980s had been abysmal.
And despite the poor growth of the majority of the East Asian and some South Asian countries, this government continued playing a very active role that gave remarkable results. At that moment there was unfavorable international environment, however, the country was able to maintain and in some situations improve on its previous development momentum (Tellis, 1987). Instead of adopting the deflationary government expenditure and the macroeconomic policies and the restrictive import and wage practices, this successful Asian country exported its way out of the crises.
This essay looks into the roles that the government and other institutions played in the economic growth of Korea between the years 1980 and 2007. The government made a decision of shifting from import-substitution to export promotion. As a result, it was able to promote expenditure switching among imports and domestic goods. In this case, the government took a set of market-friendly policy and institutional reforms as it continued to invest in human capital and the infrastructure.
It also engaged in indirect and direct promotion of the selective industrial policy. There was a backlash in the OECD countries against the neo-liberal philosophy of the eighties that had led to a low rate of economic growth and very high cases of unemployment. There was so much pressure for the government to address these issues based on the previous experiences from governments from other countries. In the United States, democrats had replaced Republicans, in most of the European countries the labor-Governments had replaced Conservative governments and there was the international influence from Japan where the governments had been playing a very active economic role It was now very clear on the Korea government that it needed to act else it would face very fatal consequences.
The mixed successes of the LDCs with the market reforms during the eighties led the international institutions to the understanding that with capable and committed governments that can be able to promote and manage the successful reforms and even the market-oriented reform, pushing the country in the right direction would be a smooth path.
Failure to this, the reform efforts would flounder and be derailed or be captured by some special groups that have special interest who are of actual or potential looser from the reforms. It is at this time that the problem shifted from minimizing government role toward making it more effective. During this period, the government played the centre and pervasive role both in establishing the institutional and economic conditions that were necessary for the occurrence of the Industrial revolution and for promoting its spread in order to follow the European nations.
Whenever the government was able to reduce the risks associated with the private transactions by the promulgating laws that limited the ability of government and the citizens to engage in entrepreneurship, there was an increase of the security of the property rights and the enforcing of the private contracts.
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