Series on E conomic Development and Growth Vol Industrial Development in East Asia A Compar ative Look at Japan, Korea, Taiwan, and Singapore Series on Economic Development and Growth (ISSN: 1793-3668) Series Editor: Linda Yueh (University of Oxford & London School of Economics and Political Science, UK) Advisory Board Members: John Knight (University of Oxford, UK) Li Shi (Beijing Normal University, China) Published Vol Globalisation and Economic Growth in China edited by Yang Yao & Linda Yueh Vol Elderly Entrepreneurship in an Aging U.S Economy It’s Never Too Late by Ting Zhang Vol Industrial Development in East Asia A Comparative Look at Japan, Korea, Taiwan, and Singapore (With CD-ROM) by K Ali Akkemik Juliet - Industrial Development.pmd 3/18/2009, 5:13 PM E Series on conomic Development and Growth Vol Industrial Development in East Asia A Compar ative Look at Japan, Korea, Taiwan, and Singapore K Ali Akkemik Baskent University, Turkey World Scientific NEW JERSEY • LONDON • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TA I P E I • CHENNAI Published by World Scientific Publishing Co Pte Ltd Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Akkemik, K Ali (Kucik Ali), 1976Industrial development in East Asia : a comparative look at Japan, Korea, Taiwan, and Singapore / by K Ali Akkemik p cm (Series on economic development and growth, ISSN 1793-3668 ; v 3) Includes bibliographical references and index ISBN-13: 978-981-283-279-5 ISBN-10: 981-283-279-3 Industrial policy East Asia Industrialization East Asia I Title HD3616.E183.A45 2008 338.095 dc22 2008040321 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Copyright © 2009 by World Scientific Publishing Co Pte Ltd All rights reserved This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA In this case permission to photocopy is not required from the publisher Printed in Singapore Juliet - Industrial Development.pmd 3/18/2009, 5:13 PM September 30, 2008 13:27 9in x 6in B-655 b655-fm PREFACE This book revisits the puzzle of whether government intervention in industrial development in East Asia led to welfare improvement For this purpose, four well-studied East Asian countries, Japan, Korea, Singapore, and Taiwan, are taken The specific features of these late-industrializing countries make up a heterogeneous group Among the four, Singapore deserves special attention as its government has maintained interventions in product and factor markets to date whereas the other three have reduced government activism largely during the last one and a half decades A common characteristic of these economies is that all of them exercised industrial policies of some sort during the course of industrialization The book reassesses the impact and consequences of such activist policies of the governments One of the most important conclusions of this book with regards to industrial policies in Singapore is that industrial policy in Singapore has contributed to positive growth and productivity increases especially after 1990 This finding clearly contrasts earlier findings in the literature I have always been suspicious and critical of the validity of the findings of some highly influential studies for Singapore which found zero productivity growth It seems quite unlikely for such a rapidly growing economy Several recent studies also found similar results for improved TFP growth after 1985 The argument of this book is such that pragmatic attitude of the government and its industrial policies had a positive role in this Another striking finding is that interventions of the governments in Japan, Korea, and Singapore did not result in welfare losses The reader may find that the book is heavy on quantitative analyses and their detailed discussions The techniques used in the analyses are standard ones However, it was necessary to provide the details about productivity analysis as it is highly data-intensive and data construction process closely follows the technical details The methodology is based on a detailed v September 30, 2008 vi 13:27 9in x 6in B-655 b655-fm Industrial Development in East Asia and very careful process of data construction There is no doubt that data accuracy is highly important in productivity analysis These data are also presented in the appendix at the end of the book With regard to contribution of the book to the literature, it can be a used as a resource material for economists interested in East Asian industrial policies and for those in similar professions It provides a case study in quantitative policy analysis using standard techniques One of the anonymous reviewers of the earliest draft of this book recommended to use the book as a teaching material at graduate level if provided with the database and the model in an attachment Following this recommendation, the database and the model are provided in a CD-ROM for the readers However, the reader should be reminded that the model has been built using General Algebraic Modeling System (GAMS) software, distributed by GAMS Development Corporation based in Washington, D.C The demo (beta) version of this software does not allow the running of long models Therefore, the licensed version of the software is needed The programming code of the model can also be viewed with a standard text editor Part of this book is based on my doctoral dissertation submitted to Nagoya University, Graduate School of International Development in Japan I am grateful to a number of people who encouraged me during my research First and foremost, I wish to express deepest gratitude to Prof Hiroshi Osada, Prof Mitsuo Ezaki, and Prof Shigeru Otsubo at Nagoya University for their guidance and encouragement during my research I benefited a lot from Prof Osada’s suggestions and long discussions with him as well as thought-provoking questions by students at his seminar class I benefited from fruitful discussions with Prof Ezaki and Prof Otsubo, especially on modeling part The general equilibrium model in this book is different from the one I used in the dissertation The current model includes more sectors and is different in equation specifications and special features regarding the behavior of economic agents I am grateful to the Ministry of Education, Culture, Sports, Science, and Technology (Monbukagakusho) in Japan for the generous financial support during my graduate study Sincere thanks and deep appreciation are extended to Delfin Go at the World Bank for sending me the programming code for his model, to Assoc Prof Mahinda Siriwardana at the University of New England in Armidale (Australia) for sending me his papers, and to Dr Paul Norman at September 30, 2008 13:27 9in x 6in B-655 b655-fm Preface vii the University of Manchester for his support in iterative proportional fitting technique Last, but not the least, further thanks go to the staff of Singapore Department of Statistics for their timely response to my data inquiries Parts of this research were presented in academic conferences held in Middle East Technical University (Turkey) and Nihon Fukushi University (Japan) Comments, in particular, by Professors Shoichi Itoh and Toru Yanagihara are greatly acknowledged Finally, I would like to thank four reviewers of the Economic Development and Growth Series and the series editor, Dr Linda Yueh, for their insightful comments and critiques Dr Yueh of Oxford University made very important suggestions on the earlier drafts of the book Comments by four anonymous reviewers helped me add new perspectives Special thanks and praise are due to Juliet Lee of World Scientific for her great effort during the editing stage of the book I am fortunate to have worked with such a nice editor She made me fully enjoy my first experience in writing a book The editing team checked every word and corrected even the smallest mistakes They did an excellent work and I feel indebted to them On a different note, I would like to thank fellow researchers and friends at GSID Further gratitude goes to Prof Aysit Tansel at METU and Prof Mete Tuncoku at Canakkale Onsekiz Mart University, my teachers during my undergraduate years at METU, for their support and encouragement before and during my studies in Japan I have accumulated many debts to a long list of friends for their intellectual and personal support David Gregory, Noriko Kanazawa, Poh Wei-Leong (for his assistance during my field work in Singapore), Dr Emre Saraoglu, and Semih Sunkar deserve special recognition I am especially indebted to my “two families” for their encouragement and forbearance during my six-year-long study in Japan My parents in Turkey always gave me the courage I needed especially during times when I was in distress living in a foreign country I received great spiritual support from my two sisters, Esen and Latife Many thanks are due to my in-laws, the Nakanishis, in Hachioji, Tokyo, who always encouraged me during my study, hosted me in their home, and treated me like their own son Delicious dishes of my mother-in-law, Emiko (okasan), have been the most important fuel of my research Grandma Yukiko (obachan) and my sister-in-law (Miho) provided me personal encouragement and made my life in Japan more enjoyable I learned a lot from them, especially from my father-in-law (otosan), Osamu September 30, 2008 viii 13:27 9in x 6in B-655 b655-fm Industrial Development in East Asia My wife, Tomomi, has always been there when I desperately needed support I started my doctoral study soon after we got married She has been a great wife to me and a wonderful mother to our son, Mert Shouei She deserves more than half of the credits for this book Mert was born six months before I received my doctoral degree During the stressful final months of my research where everything surely goes wrong and it takes a lot time to fix the errors, watching his smiling cute face was enough for me to forget about all the trouble and gave me an extra power in completing my research In the development economics discipline, there are many theories but not enough facts This book is intended to deal with a special topic for which theories are contentious I hope that this book meets the expectations of people in the field and those who have supported and encouraged me Ankara, September 2008 September 30, 2008 13:27 9in x 6in B-655 b655-fm CONTENTS Preface v Acronyms Introduction 1.1 1.2 1.3 1.4 xiii Economic Development in East Asia The Role of Government in East Asia Objectives and Methodology Organization of the Book Industrial Policies in Japan, Korea, and Taiwan 2.1 Industrial Policy: Definition and Theoretical Underpinnings 2.2 The Objectives of Industrial Policy 2.3 Instruments of Industrial Policy 2.3.1 Competition policy 2.3.2 Trade policy 2.3.3 Tax and financial sector policies 2.3.4 Labor market policies 2.3.5 Technology policies 2.3.6 Foreign investment policies 2.4 Summary and Conclusion Industrial Policies in Singapore 13 13 14 16 17 19 20 22 24 27 3.1 Singapore Economy at a Glance 3.2 Singapore’s Industrial Policies: A Historical Perspective 3.2.1 Industrial policies before 1985 3.2.2 Industrial policies after the recession ix 27 33 33 47 September 30, 2008 9in x 6in B-655 b655-appendix Industrial Development in East Asia Precision and engineering equipment 2.5 1.5 1998 2001 2001 1995 1992 1989 1986 1983 Total L 1998 LQ 1980 1977 1974 1971 1968 1965 0.5 Translog L Transport equipment LQ Total L Fig A.2 (Continued) 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 316 10:46 Translog L FA September 30, 2008 10:46 9in x 6in B-655 b655-appendix Appendix Food, beverages, and tobacco 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Textile manufactures K share L share 1995 1997 1999 2001 1987 1989 1991 1993 1981 1983 1985 1975 1977 1979 1971 1973 1965 1967 1969 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 TFP index Fig A.3 Translog index of productivity growth by industry (1985 = 1.0) 317 FA September 30, 2008 9in x 6in B-655 b655-appendix Industrial Development in East Asia Wearing apparel (except footwear) 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 K share L share TFP index Leather, leather products, and footwear 2.5 1.5 0.5 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 318 10:46 K share L share Fig A.3 (Continued) TFP index FA September 30, 2008 10:46 9in x 6in B-655 b655-appendix Appendix Wood and wood products 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Furniture and fixtures (except metal furniture) 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share Fig A.3 (Continued) TFP index 319 FA September 30, 2008 9in x 6in B-655 b655-appendix Industrial Development in East Asia Paper and paper products 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Publishing and printing 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 320 10:46 K share L share Fig A.3 (Continued) TFP index FA September 30, 2008 10:46 9in x 6in B-655 b655-appendix Appendix Chemicals 2.5 1.5 0.5 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Refined petroleum products 4.5 3.5 2.5 1.5 0.5 K share L share Fig A.3 (Continued) 1999 2001 1993 1995 1997 1987 1989 1991 1981 1983 1985 1975 1977 1979 1969 1971 1973 1965 1967 TFP index 321 FA September 30, 2008 9in x 6in B-655 b655-appendix Industrial Development in East Asia Rubber and plastic products 3.5 2.5 1.5 0.5 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Non-metallic minerals 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 322 10:46 K share L share Fig A.3 (Continued) TFP index FA September 30, 2008 10:46 9in x 6in B-655 b655-appendix Appendix Basic metals 2.5 1.5 0.5 19 65 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 K share L share TFP index Fabricated metal products 1.2 0.8 0.6 0.4 0.2 K share L share Fig A.3 (Continued) 2001 1997 1999 1991 1993 1995 1987 1989 1983 1985 1977 1979 1981 1973 1975 1969 1971 1965 1967 TFP index 323 FA September 30, 2008 9in x 6in B-655 b655-appendix Industrial Development in East Asia Basic machinery and equipment 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 K share L share TFP index Electrical and electronic machinery and appliances K share L share Fig A.3 (Continued) 1997 1999 2001 1985 1987 1989 1991 1993 1995 1973 1975 1977 1979 1981 1983 1.8 1.6 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 324 10:46 TFP index FA September 30, 2008 10:46 9in x 6in B-655 b655-appendix Appendix Precision and engineering equipment 1.5 0.5 -0.5 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share TFP index Transport equipment 1.4 1.2 0.8 0.6 0.4 0.2 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 K share L share Fig A.3 (Continued) TFP index 325 FA September 30, 2008 10:46 9in x 6in B-655 This page intentionally left blank b655-appendix FA September 30, 2008 11:53 9in x 6in B-655 b655-Index Index Competition Policy, 14 Computable general equilibrium model dynamic model, 201 dynamic module, 221 imperfect competition, 259 Japan model, 259 Korea model, 265 overview, 200 previous models of Singapore, 201 simulation experiments for Japan, 260 simulation experiments for Korea, 266 simulation experiments for Singapore, 239 Singapore model, 203 static model, 201 Constant elasticity of transformation, 211 Cooperation, 14 Corrective wage policy, 46 Critical Skills Scheme, 68 Amsden, Alice, 5, 82 Armington function, 210 Arrow-Debreu tradition, 200 ASEAN Free Trade Area, 61 Asian Dollar Market, 87 Asian financial crisis, 50, 273 Asian values, 81 Bangalore, 61 Bank of Korea, 90 Batam, 60 Big Push, 11 Bintan, 61 Capital reallocation effect, 164 Capital stock estimation, 148 Capital-intensive industries, 85 Catching-up, 20 Central Provident Fund, 37, 107 Chaebol, 14, 18 Changi Airport, 63 China, 51 Chun Doo Hwan, 90 Civil Aviation Authority, 63 Cobb-Douglas production function, 208 Co-Investment Program, 49 Commercial and Industrial Security Corporation, 63 Committee on Singapore’s Competitiveness, 50 Comparative advantages critique of the neoclassical view, neoclassical view, Competition, 14 de Melo, Jaime, 266 Depreciation rate, 149 Development Bank of Singapore, 35, 50 Developmental state, 1, Directed credits, 19 Disembodied technical change, 145 Divisia index, 144 Divisia share, 138 Domestic Supply Price Index, 104 Dynamic comparative advantages, 11, 16 Dynamic linkage effects, 70 Dynamic shift effect, 124 327 September 30, 2008 328 11:53 9in x 6in B-655 b655-Index Industrial Development in East Asia Economic bureaucracy autonomy, 15 Economic Committee, 48, 54, 58, 62 Economic development East Asia, Economic Development Board, 35, 52, 57 Economic Review Committee, 51 Economies of scale dynamic economics of scale, 12 Embodied technical change, 145 Exact index number, 144 Export processing zones, 16, 24, 92 Export promotion, 16 Export-oriented policies, 85 Ezaki, Mitsuo, 265 Financial sector policy, 17 Flexible aggregator, 144 Flexible wage system, 54 Flying geese hypothesis, 22, 83 Foreign direct investment, Foreign investment policy, 22 Free trade neoclassical argument, General Algebraic Modeling System, 221 Geometric depreciation, 150 Goh Chok Tong, 49 Goh Keng Swee, 80 Government Role in economic development, Government-linked companies, 62 Growth triangle, 57, 59 GTAP model, 201 Harberger, Arnold, 121 Heavy and Chemical Industrialization Drive, 18, 85, 90 Hicks-neutral productivity growth, 142 High-wage policy, 46, 53 Ho Chi Minh City, 61 Hodrick-Prescott filter, 109, 115 Hong Kong, Housing and Development Board, 35 Import protection, 84 Index of industrial production, 104 Indonesia, 58 Industrial development, Industrial policies after the 1980s, 273 concept, definition, 10 difference from macroeconomic policies, 10 disciplining private firms, 14 instruments, 13 Market-enhancing approach, neoclassical evaluation, objectives, 13 picking the winners, 10 pros and cons, Revisionists’ view, tax incentives, 17 World Bank’s view, Industrialization path, 84 Industry Capability Upgrading Plan, 68 Infant industry protection, 11, 84 Infocomm Development Authority, 72 Innovation, 20 International Enterprise Singapore, 50 International political economy, 96 International Trading Company, 37 Intra-industry productivity growth, 124 Intra-industry technical change, 162 IT 2000, 49 IT Training Assistance Scheme, 68 Japan competition policy, 14 liberalization, 14 policy-based finance, 88 tax policy, 18 trade policy, 16 Japan Development Bank, 18, 88 Japan Export-Import Bank, 89 Johor, 57 Jurong Town Corporation, 35, 63 September 30, 2008 11:53 9in x 6in B-655 b655-Index Index Kaldor, Nicholas, 121 Keiretsu, 14 Keisha seisan houshiki, 18 Korea characterictics of government, 80 competition policy, 14 debt problem, 90 directed credits, 18 foreign investment, 92 foreign investment policy, 23 industrialization path, 84 Japanese colonization, 75 liberalization, 15 policy-based finance, 89 protection, 17 public companies, 95 relations with the US, 96 rent creation, 15 rent distribution, 90 tax policy, 18 technology policy, 21 technology transfer, 23 trade policy, 16 Krugman, Paul, 152 Kuomintang, 79 Labor market policy, 19 Labor productivity and structural changes, 121 and total factor productivity, 164 decomposition, 122 decomposition results for Japan, 186 decomposition results for Korea, 187 decomposition results for Singapore, 125 decomposition results for Taiwan, 187 trends for Japan, 184 trends for Korea, 184 trends for Taiwan, 184 trends in Singapore, 109 Labor reallocation effect, 164 Latecomers East Asia, 3, Late-industrializing economies, Learning, 20 329 Lee Kuan Yew, 49, 80 Lee, Hiro, 259 Local Enterprise Finance Scheme, 68 Local Enterprise Technical Assistance Scheme, 69 Local Enterprises 2000, 49 Local Industry Upgrading Program, 70 Macro-SAM, 223 Main-bank system, 18 Malaya Federation, 34 Malaysia, 57 Manufacturing 2000, 49 Market failures, 11 neoclassical view, Market-enhancing approach, Market-friendly approach, Meta production function, 155 Micro-SAM, 231 Multi-period models, 201 Mushroom-process, 121, 197 National Computer Board, 63, 72 National Investment Fund, 90 National IT Plan, 72 National Productivity and Innovation Movement, 69 National Science and Technology Board, 72 National Science and Technology Plan, 72 National Technology Plan, 49, 72 National Wage Council, 45, 53 Neo-import-substitution, 21 Neptune Orient Line, 37 Newly Industrializing Economies, 3, 288 Next Lap, 49, 58 Numéraire, 200 Oligopolistic markets, 14 ORANI model, 201 Paik, Hoon, 265 Park Chung-Hee, 80 Partial equilibrium analysis, 276 People’s Action Party, 80 People’s Finance Corporation, 89 September 30, 2008 330 11:53 9in x 6in B-655 b655-Index Industrial Development in East Asia Perpetual inventory method, 148 Picking the winners, 10 Pioneer status, 39 Pohang Iron and Steel Company, 95 Port of Singapore Authority, 37, 63 Post Office Savings Bank, 50 Priority production system, 18 Product life cycle theory, 22, 83 Productivity low wage-productivity tradeoff, 13 Productivity and Standards Board, 50, 69 Productivity Fund, 69 Public investments, 86 Public Sector Divestment Committee, 62 Public Utilities Board, 37, 63 Quality index of capital, 141 of labor, 139 Real wages trends in Singapore, 120 Reallocation effect, 162 Recursive dynamic models, 201 Regionalization, 58 Regionalization 2000, 49, 58 Rent creation, 15 Resource allocation, 11, 14 Revisionists, Rhee, Syngman, 80 Riau, 57 Rosenstein-Rodan, 11 Rybczynski’s theorem, 165 Second Industrial Revolution, 47 Sentosa Development Corporation, 37 Set-up costs, 12 Shift effects, 124 Shift-share analysis, 121 shortcomings, 125 Shoko Chukin Bank, 88 Sijori Growth Triangle, 57, 59 Singapore 1985 Recession, 47 authoritative government, 80 characteristics of government, 80 Chinese entrepreneurs, 38 competition policy, 62 dependence on trade, 32 development plan, 37 developmentalism, export promotion, 39 export-oriented development, 39 external economy, 57 financial sector, 87 foreign investment, 39 foreign investment policy, 56 foreign labor, 45 free trade regime, 56 government failures, 61 import substitution, 34 industrialization path, 86 labor market policy, 53, 131 local companies, 40 paternalism, 81 pomotion of SMEs, 65 pragmatism, 81 privatization, 64 productivity enhacement policies, 68 promotion of capital-intensive industries, 46 promotion of knowledge-intensive industries, 48 promotion of labor-intensive industries, 38 promotion of SMEs, 68, 70 relations with the US, 96 services development, 86 SMEs, 65 state-owned enterprises, 64 tax policy, 55 technology policy, 55 trade policy, 56 uniqueness, 274 wage restraint policy, 53 zero TFP growth, 151 Singapore Broadcasting Corporation, 63 Singapore Exchange, 88 Singapore International Money Exchange, 88 Singapore Manufactured Price Index, 105 Singapore Productivity Movement, 69 ... newly industrializing economies (NIEs) of East Asia (Korea, Singapore, September 30, 2008 11:53 9in x 6in B-655 b655-ch01 Industrial Development in East Asia and Taiwan), also called the “late-industrializing... 11:53 9in x 6in B-655 b655-ch01 Industrial Development in East Asia government intervention in industrialization This means that the industries whose development was deemed necessary for industrialization... conflicting views about the role of government in industrialization in East Asian experience Anglo-Saxon economists showed no interest in industrial policies at the beginning because they believed in