Moving directly on from the general overview offered by the first chapter,this chapter look closely at the issue of the appropriate role for government in promoting sustainable private sector-led economic development. Defining the role of the government in economic management will depend upon what line is drawn between the government's role and that of the economy is private sector. This contentious issues is traced back to the discussion over the feasibility of the socialist economic calculation during the early twentieth century (originally intended by Ludwig Von missed and Oscar Lange)
And has continued right through to the more recent debate on the desirability of a government-led economic development strategy in the 1990s. In spite of the innumerable work of economic with varying viewpoints, the ongoing debate can ultimately be reduced down to the simple issue of market failure or government failure. Traditionally market failure have been seen as the most justifiable reason for active government intervention. However it should also be emphasized that market failure are in most cases a reflection of institutional failure-which is in essence a from of government failure
>>. The chapter outlines some lessons to be learned from the Korean experience of government - led economic development over the past thirty years by examining the policy pattern, defining their character is tics and suggesting the desirable role of the government in a globalization would.korea's experience suggests that active and protracted governmental intervention in properly allocating resources might achieve some short-term goals, but only at the expense of some long- lasting adverse side-effects. For example the distorted relatives price system and incentives structure resulting from such interventionist policies has meant that the private sector has been reluctant to economize. After the government utilized theme credit distribution station for over three decades Korean banks paid more attention to the volume of deposit than to their overall profitability. In other words, Korean banks considered a corporation in terms of how much it borrowed rather than it's profitability. It has been argued that although government intervention in resource allocation enjoyed some success in the 1960s and 1970s , this is no longer the case because the size and complexity of the Korean economy have already reached a point where the informational superiority of the government over the private sector can no longer be guaranteed.