type. The weakness of product cycle-type development is that it tends to create an enclave for export-oriented industries. In such cases, all raw materials are imported and all products are exported, and even if they earn trade surpluses, the industrial structure will lack upstream and downstream industries. The ASEAN countries are beset by this weakness.

The same weakness exists in South Korea, which has achieved dramatic development depending on domestic capital. Since the early 1960s, the country has made it mandatory to procure domestic parts for designated items and enacted law to foster small and medium-sized enterprises. However, as the country has made such a haste in developing heavy and chemical industries, its growth has depended heavily on financial conglomerates. Such growth increased the dependence on foreign countries, especially Japan, for not only technology but also parts and intermediate materials.

The delay in the development of small and medium-sized enterprises poses a problem not because it creates a trade deficit. Perhaps, it is to be commended from the standpoint of mutual interdependence. We should discard the argument that all countries should post surpluses. The important point is income gap and the productivity of the country as a whole. The presence of small and medium-sized enterprises increases jobs, contributes to narrowing of income gap and the increase in the productivity of small and medium-sized enterprises should improve productivity of the national economy as a whole.

In the 1960s, it was said in Japan that the two-tier structure of its economy was inevitable and that it was an incurable disease. However, while Japan achieved high economic growth, small and medium-sized enterprises developed dramatically and in some cases, productivity and wages of these firms have exceeded those of large enterprises. This is because, although it has been criticized from abroad, large enterprises and small and medium-sized companies formed groups, called keiretsu and jointly engaged in product development and improved productivity. If quality control and total quality control are efforts to improve productivity in a plant, keiretsu is a corporate group-wide efforts to raise efficiency. In policy measures, there have been a preferential tax system and preferential financing for small and medium-sized firms and subsidies for joint development. In South Korea and the ASEAN countries, industrial development as a whole has been highly successful, but it is undeniable that they have postponed to the future the resolution of the problem of fostering small and medium-sized firms.

## From development dictatorship to democracy

The argument that permits development dictatorship is a hopeful argument that although dictatorship is inevitable while the country is in the process of development, sooner or later there will be movement toward democracy. In the case of South Korea, the country was ruled by a military government but eventually politics by elections were realized. The country is still suffering from many aftereffects of military dictatorship such as labor strifes. However, it is advancing in its own way. South Korean politics, which were called development dictatorship, have had a beneficial effect of preparing a path toward a market economy in North Korea. A similar development has been observed in Thailand. This country has been ruled by prime ministers who were either military men or backed by military groups. However, their policies have built the present-day Thailand and have stimulated the shift to