Dirigisme

The term dirigisme is derived from the French word diriger (to direct), which signifies the control of economic activity by the state. Preventing market failure was the intellectual basis of the planning syndrome. Dirigisme originated in France following World War II to promote industrialization and protect against foreign competition and was then mimicked in East Asia. Although still a capitalist economy, dirigiste policies often include centralized economic planning, directing investment, controlling wages and prices, and supervising labor markets. Even though countries with dirigiste political economies experienced some economic success, dirigisme has since been challenged.

Postwar planning became a widespread activity following economic stagnation before World War I and the Great Depression. In France, dirigisme took the form of indicative planning, which entailed government credit policies and subsidies, developing new technologies, and the regulation of employment overseen by a special planning commission, the Commissariat au Plan. The French government also embarked on ambitious projects, encouraging the formation of national champions in large industry groups, such as the transportation system. Long-term plans were guided by state technocrats composed of commission members, high-ranking civil servants in the ministries, and leaders of financial institutions and businesses. Furthermore, an elite university for public administration, the École Nationale d'Administration, was established to train future state planners.

Similar to France, state authorities in Japan also pursued dirigiste policies prioritizing selected sectors for rapid development and recruiting technocrats from the nation's elite schools for positions as planners in the state administration. Following the Japanese and French models, Korea promoted its version of national champions, the chaebol, providing long-term subsidized credit to a few industrial groups. In Taiwan, the government chose to support capitalintensive industries, such as shipbuilding and petrochemicals.

Many attribute the collapse of dirigisme to the increased complexities of a highly competitive and internationalized economy as strategic planning capacities of state technocrats became severely limited. Dirigisme flourished in the 1950s and 1960s in [Page 231]France, but sour economic results, uncompetitive enterprises, and declining sectors forced the government to largely renounce dirigisme in the 1980s. Dirigisme was also largely blamed for the bursting of the Asian bubble economy in the late 1990s. Financial crisis and recession in Japan was seen to have been a result of its failure to change long-established institutional patterns of behavior. In Korea, state activism in the market economy was considered as crony capitalism. Although dirigisme has undoubtedly given way to more market-centered political economy in these countries, the state is still arguably active in various ways.