And all the roads that lead us there are winding
In the early 1960s, South Korea was not the economic powerhouse we know today. It was a country grappling with poverty, struggling to find a path to growth. When General Park Chung-hee came to power in 1962, he promised to weed out cronyism and lead the nation towards economic rejuvenation. His first step was drastic: he threw the leading industrialists of South Korea in jail. Park was sending a message that the days of cozy business-government relationships, which benefited a privileged few at the expense of national progress, were over. But that was just the beginning of a story that would define South Korea's economic trajectory. A story, by the way, remarkably well told in multiple books - begin with The Miracle, by Schumann, and How Asia Works, by Studwell.
A recent column by Pramit Bhattacharya on the debate over national champions in India reminded me of General Park's approach to industrial policy, and how fundamentally different it was from what we see today in India. Bhattacharya discusses the Adani Group and the idea of national champions in the Indian context, drawing parallels to historical examples like South Korea. The discussion around national champions is a fascinating one, as it touches upon the delicate balance between state support and corporate accountability.
While there is a lot to be said about industrial policy in general, and its applicability to Indian conditions, the main point I want to highlight is the lack of the stick in India's approach. Export discipline is an integral part of industrial policy when used for export promotion, and it is a lesson we would do well to remember from the South Korean experience. Yes, large industrial conglomerates need support, and yes, they perform better with both the implicit and explicit backing of the state. But that backing must come with conditions. The state must retain the ability to not just issue threats but actually deliver on them if export targets are not met. Without meaningful export discipline, industrial policy simply will not work.
When Pramit talks about why the kind of industrial policy that worked in South Korea will not work here, it is an underrated and extremely important point. Survivorship bias is at play when we celebrate South Korean chaebols today, like Hyundai and Samsung. We often forget the ones that did not make it—companies like Ssangyong and Daewoo (among others), which failed to meet the government's stringent export targets and, as a result, were left by the wayside. This weeding out of inefficient players was as important as supporting the good ones. It enabled South Korea to be left with the firms that could win, not just the ones that received state support no matter what.
In India, we have seen large industrial conglomerates receive state backing, whether implicit or explicit, but there seems to be little in the way of accountability. There needs to be an explicit "or else" that accompanies state support. The government must be willing to walk away from firms that do not deliver. Weeding out inefficient players is as important as nurturing the successful ones. This is the true lesson of what worked in North East Asia, and as Pramit puts it, it is vanishingly unlikely to work in India without significant changes in our approach.
General Park's story did not end with throwing the industrialists in jail. After a period of detention, they were conditionally released—but with a clear understanding. They were free, but only as long as they complied with the government's demands for investment, industrial expansion, and export growth. Failure to meet the targets set by the government would mean a swift return to jail. Park's combination of carrots and sticks disciplined Korean industry in a way that allowed the country to grow rapidly, but it came at the cost of a degree of authoritarianism that is neither possible nor desirable in India.
Ask yourself: could this kind of approach happen in India? Should it happen in India? The answer to both questions is probably no. And that is why India's road is, and should be, long. We want Asian growth, but with Indian characteristics. We need to find our own way to balance state support with corporate accountability—a way that works within the framework of our democratic values.