Postwar emerging economies: free markets, industrial policy, and trade experiences

¶ … Post War

What do the experiences of postwar emerging economies say about free markets, industrial policy, and trade?

Over the last several decades, the economic policies have been continuously evolving. Part of the reason for this, is because there has been a fundamental shift among economists and government officials about how consistent levels of economic growth can be maintained. While at the same time, they are trying to limit the negative repercussions from what can occur during economic contractions. Over the course of time, this has led to a transformation about the free markets, industrial policies and trade. To fully understand how this is taking place requires looking at the scope of these changes and the impact that they are having on emerging economies. Once this occurs, is when we will be able to see how these transformations have led to a shift in economic relations between the different nations and their trading partners. (Bruton, 1998, pp. 903 -- 936)

The various experiences since the end of World War II surrounding emerging economies, have led to a change in views of the markets, industrial policy and trade. What happened was, the period from 1945 to 1965 generally marked a time when the U.S. was considered to be the most dominant economic power on Earth. This is because, Europe and Japan were still rebuilding. While, countries such as: China and Korea were impacted by a civil war. In the case of China, they established a Communist government and became a closed society until the 1970's. However, Korea was divided between the North and the South. As the South, was more open to liberal economic policies. Whereas, North Korea became closed and isolated. This is important, because during this time economic theory was mainly focused on: limited open markets between countries, many of the different policies were designed to protect industry and trade was confined to certain products that were approved. (Frye, 1997, pp. 354 -- 358) (Krueger, 1998, pp. 1513-1522)

However, by the mid-1960's is when there was change in economic theory. This is because, countries such as Japan and those in Western Europe had rebuilt from the war. At which point, they began to vigorously compete against American firms. Then, during the 1970's is when China and other nations throughout Asia began to focus on trading aggressively with: Europe, Japan and the United States. This meant that the overall amounts of competition facing American companies increased exponentially. Once this occurred, is when they began to become more competitive against foreign firms. (Frye, 1997, pp. 354 -- 358) (Krueger, 1998, pp. 1513-1522)