Vietnam, seems to have gained much more merit from the economic opening than the demerits of the collapse, owing to its geographic proximity to the dynamic Asian economies. Currently, Vietnamese trade with the Asian economies accounts for 68 percent of exports and 44 percent of imports, and foreign investment is about to rush into Vietnam. The exception is Mongolia, which is landlocked and located far from the dynamic Asian economies, and could not make use of openness and suffered seriously from the collapse of the CMEA.

(Mihira)

## 1 -3 Market Mechanism and the Role of Government in the Process of Economic Development

## 1 -3-1 Introduction

The importance of the role in governments is changing over time, and has, in recent years, been reconceived in the United States, Macroeconomics has undergone dramatic changes, especially from the second half of the 1980s. This is not unrelated to the deterioration of the real economy in the United States following the Great Depression (Stiglitz, 1993a). At the beginning of the 1980s, there emerged the school of real business cycles in line with the currents of the neoclassical school, which conceived of economies as the continuation of equilibrium points. Actually, however, unemployment arose in the American economy and economic growth --rather than stabilization of the macroeconomy-- become problematic. This had an impact on Lucas (1993) and others of the neoclassical school, and analysis on economic growth in Korea and elsewhere in East Asia began. What these economists advocate is investment in human resources. This is also the field in which the results of many years of research by the Nobel prize winner, G. Becker, and others belonging to the Chicago school have grown. What is especially important here is the emphasis by the neoclassical school on the existence of market failures in the course of economic growth (development). In other words, the role which government should play in development has been clarified.

In the 1980s, the so-called “New Keynesian” school of thought captured a wide following. This school clarified the role of government with respect to various points in economic development such as coordination failures, credit rationing and information-related externalities. In particular, a paper recently published by Stiglitz (1993b) is expected to have a revolutionary impact on macroeconomic debates. Analysis took place, for example, not from the effective demand side, as stressed by Keynes, but from the effective supply side. In this connection, the impact of credit rationing on the business climate is analyzed from a microeconomic foundation, and the necessity of government intervention is advocated.

In this debate, there is a close connection between development theory and “the East Asian Miracle” issued by World Bank (1993). Stiglitz was influential in the writing of this work. In it, the World Bank recognizes the role of government in making selective interventions, and analysis was made from the standpoint of economic development through an export-push strategy. It is especially noteworthy that this strategy also parallels that of the Clinton Administration.

Agreement will be found on the supposition by the IMF and the World Bank that macroeconomic stabilization is a “prerequisite condition” for the implementation of structural adjustment policies and industry policies. What is more, the World Bank has come to