August 27, 2018

What role should the state play as the pace of globalisation accelerates?

Beginning in Thailand in July 1997 with the devaluation of the Thai baht, the Asian Financial Crisis (AFC) rapidly swept across Southeast Asia and Japan to trigger the devaluation of Asian currencies and slumping of Asian economies along with financial and political upheavals. Free-marketers, who believe that market forces should be allowed to operate without any government intervention, argue that in the age of rapid globalisation, the crisis was the result of the malfunction of government-led macroeconomic planning. A/P Jang-Sup Shin (Department of Economics) asserts that, on the contrary, the role of the state becomes more important as the pace of globalisation accelerates. He uses South Korea and Singapore as case studies to elaborate by comparing the different challenges they faced.

Shin, in his 2005 paper, ‘Globalisation and Challenges to the Developmental State: A Comparison between South Korea and Singapore’ (published in Global Economic Review), defines globalisation as the process of reducing the distinction between domestic and foreign markets and capital. He opines that the challenges faced by both nations were not uniform. South Korea, which followed the nationalist model of development and protected its local industries from foreign markets, faced more difficulties than Singapore. Singapore adopted the internationalist model of development which made little distinction between foreign and domestic markets. The ways in which both nations responded to globalisation were diverse due to differences in size, geography, history, internal politics, and national leaders. Shin argues that the study of globalisation and the role of the state can be enriched by adding more layers to the analysis and accommodating, to an extent, the specificities of individual countries.

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