Based on a new understanding of functionally equivalent policy, this chapter conducts an exploratory level analysis on the question of why policy methods (i.e. functional equivalents) outside of social policies in post-war Japan and South Korea ended up taking on social policy roles. The development of functional equivalents in Japan and Korea is closely related to a fiscal strategy based on private savings rather than free market ideology within the context of industrialization. This fiscal strategy left little room for social policies based on taxation to develop, but left plenty of room for various functional equivalents. Although the proportion of functional equivalents decreased with the end of state-led industrialization, the path-dependency created by the unique developmental fiscal strategies still contribute to the continuity of the small welfare state by limiting the use of tax-and-spend policy.