In the realm of economic development at the global level, there are a multitude of theories that can be used to explain the development policy of certain countries. Each of the different development methods focuses on several factors, ranging from the history of growth to the factors that have resulted in growth in some countries and underdevelopment in others. Two examples of development theory are Structuralism and Institutionalism. Institutionalism focuses on the importance of formal government and economic structures and considers reliance on both to be critical to economic stability. On the other hand, structuralism attempts to explain the structural aspects that have had an effect on economic policy in individual states.
Structuralist development theory emerged in the 1950s as a response to the perceived failures of Classical Liberalism, in particular, the belief that economic stability and growth stems from a stronger reliance on the free market as opposed to the governments of individual states. On the contrary, Structuralism attempts to identify specific inflexibilities and intervals of the structure of developing economies that affect economic changes and the choice of development policy. Structuralism also serves as a way to explain the failures of the free market to address issues such as the uneven distribution of income and the balance of payments disequilibrium in developing countries. The methodology of Structuralism is based on the belief in a dual economy and the concept of complementarity in demand, which underlies the theories of balanced growth. The idea of the dual economy stems from the observation that development operates unevenly both between and within different sectors of the economy due to inherent structural inefficiencies. Additionally, Structuralism argues that the differences between both developing and developed countries will not disappear overnight. Instead, the structural differences between the developed and less developed countries call for an entirely new analytical approach than the one offered by proponents of alternate theories.
One such country that Structuralism can be applied to is South Korea. Shortly after the end of the Korean War, the South Korea government set up policies that encouraged domestic savings and opened up the country to international trade. South Korea’s economy is defined by a high-level government intervention in the economy, and its political system was characterized by an authoritarian system until the late 1980s. As a result of government-led economic planning, South Korea’s economy grew at a rapid rate since the early 1960s and the country served as a model for successful state economic planning. In 1997 however, the South Korean economy experienced a severe downturn that came about as a result of a shortage of foreign currency. In the years since the financial crisis, South Korea has taken steps to restore confidence in its economy and to reform its previously lax regulatory structure.
The economic experiences of South Korea can be used to both evaluate the strengths and weaknesses of Structuralism. For example, Structuralism promotes the belief that the state must play a significant role in fostering economic growth and development. It can be argued that as a result of government intervention in the economy, the South Korean economy was able to undergo unparalleled success and emerge as one of the strongest economies in Southeast Asia. On the other hand, the fact that South Korean political leaders failed to heed the warnings that led to the 1997 financial crisis highlights the belief that structuralist theory may not adequately address issues such as market failure and may not be the best way to explain the causes behind financial collapses.