Hyun-Chin Lim Seoul National University & Jong-Cheol Kim Seoul National University November 17, 2012 New Zealand, Korea and Asia Pacific: From distance to closeness Auckland, New Zealand 1
- Background - Research Questions - Arguments - Theoretical Resources - Rise and Fall of the Korean Developmental State - Resurge of the Developmental State? - Conclusions 2
Backdrop: Economic miracle of Korea GNP per capita increase 1961: US $ 81 2011: US $ 22,489 (US $32,100, PPP) GDP increase 1961: US $2.3 billion 2011: US $1,116 billion (IMF) Diverse Explanations: - Market-friendly theories (World Bank, 1993) - Profit-investment nexus theories (Akyz and Gore, 1996) - Confucian culture theories (Tu, 1984; Morishima, 1981) - Industrial Policy theories (Johnson, 1982; Amsden, 1989; Wade, 1990) 3
Strong role of the state Outward-looking development strategy Free from organized labor and business circle Good education system Efficient state-bureaucracy Strategic role in industrial transformation No particularistic interests of the private sector Growth-machines: chaebols + banks + government Family-owned and diversified business groups Soft credits and policy loans: Role of patient capital Crony capitalism? Implication Different from both neoclassical free-market system and dependency de-linking path 4
Democratic Transition in the late 1980s Globalization Pressure in the 1990s Financial Crisis in 1997 $58 billion emergency bail-out from IMF Challenge to the developmental state Defaming of the system All illness of the economy from the developmental state Symbol of cronyism Alternative: Neoliberal reforms Liberalization, privatization, and deregulation Restructuring measures 5
Why the developmental state again? World Economic Crisis in 2008 Actually, the crisis of the US and European Economy Early bounce back of Asian economy from recession: China, Korea, Taiwan, Singapore Beijing Consensus (vs. Washington Consensus) Diverse developmental strategies Increasing roles of the state required 6
Resurgence of the developmental state? Pressure of globalization Democratization Limiting the leadership of bureaucrats? Main Argument Return to the trad. developmental state: Negative Possibility of the post-developmental state: Positive 7
State’s interventionist role in the economy Johnson (1982): MITI and the Japanese Miracle . Gold (1986): State and Society in the Taiwan Mirac le Amsden (1989): Asia’s Next Giant: South Korean a nd Late Industrialization Wade (1990): Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization Woo (1991): Race to the Swift: State and Finance in Korean Industrialization Chang (1994): The Political Economy of Industrial Policy Evans (1995): Embedded Autonomy: States and Industrial Transformation Weiss (1998): The Myth of the Powerless State 8
• State autonomy and state capacity Weberian State Structure Dimension Degree of Rationalization of State Bureaucracy HIGH LOW Weber’s Ideal-typical Rational- Ideal-typical Patrimonial State Legal Bureaucracy Degree of Marixan Embeddedness Class- HIG Developmental Bourgeois Clientelist of State in Civil H State State Society: State Dimension Network with Dominant Class, etc. Overdeveloped Predatory LOW Post-Colonial State State
Elinor Ostrom (1990) Governing the Commons Amartya Sen (2000) Development as Freedom Shin & Chang (2003) Restructuring Korea Inc Peter Evans (2010) “Capacity is development” Diverse Development Experiences 10
Liberation: 1945 Establishment of Korean government: 1948 Korean War: 1950-1953 Aid-dependent economy in the 1950s Student-led revolution: 1960 Park Chung-Hee regime: 1961-1972, 1972-1979 High time of the Korean developmental state 11
• Strong leadership of bureaucrats – Supported by dictatorship – Embedded autonomy (Evans, 1995) – Policy loans (Woo, 1991) – Strategic industrial policy (Chang, 1994) • Weak business elites - Chaebol: family-owned and diversified business groups • Growth-machines: chaebols + banks under the direction of bureaucrats • Docile workers • Weak civil society • Geopolitics of the Cold War 12
Partial Liberalization and Quasi Civilian Government: 1980-1987, 1987-1992 Democratic transition Pressure for liberalization of finance and direct investment (from the US) Kim Young Sam Regime: 1993-1997 Segyehwa Kim Dae Jung Regime: 1998-2002 Economic crisis and neoliberal reform Roh Mu Hyun Regime: 2003-2007 Continued neoliberal reform Lee Myung Bak Regime: 2008-Current Strengthening global integration 13
The Kim Young Sam regime Feb. 1993 - Feb. 1998 the first civilian government since the early 1960s “New Korea”( shin han’guk ) Project To cure the “Korean disease” from the authoritarianism of the past years To upgrade Korea’s status in international stratification system 14
Excessive financial liberalization Capital-market opening A series of deregulation for international capital flows No control of government in private short-term loan Lost control tower of the economy Merger of the EPB (Economic Planning Board) and the MOF (Ministry of Finance) into the Ministry of Finance and Economy in 1994 Stop of the EPB’s decade-long role in the development planning of the country Weakened developmental policy in the making of industrial and financial policies Result Financial meltdown in the crisis of 1997 15
• President Kim Dae Jung (DJ) – 1998-2003 • Crisis Management – Neoliberal reform without reservation – Revising macroeconomic coordination – Lack of long-term perspective 16
Roh Moo-Hyun’s Presidency 2003 – 2008 Dramatically elected president Favoring economic equality Growing foreign influence Market share of foreign investors in the Korean stock exchange: 42% (2004) Global investors’ signals to the domestic economy became more important Importance of the “economy” High-ranking public officials in economic ministries and bureaucracies became more powerful than those in the welfare and other offices 17
Lee Myung-Bak’s Presidency • 2008 – Present • Former CEO (Hyundai Construction Co.) • Benefiting from people’s disappointment Centrist liberal democratic government’s inability to improve socio-economic conditions • Market-friendly economic policies Growth-oriented policies and the idea of the free market economy • Strengthening globalization Lowering the import standard for the US beef to Korea, without referring to domestic democratic procedures Privatization of SOEs (State-Owned Enterprises) Drive 18
Legitimacy crisis • Citizens’ candlelight vigils in 2008 • “Direct action democracy” • Government’s resorting to authoritarian measures Backlash • People’s huge sympathy with Roh’s death in May-June, 2009 • Defeat of governing party in the local election in 2010 19
Quasi Civil. Segyehwa DJ-nomics Roh Moo-Hyun Lee Myung- Govt Bak (1993-1997) (1998-2002) (2003-2007) (1987-1992) (2008-Current) Deepening Democratic Globalizatio Neoliberal Global Global Transition n Drive Reform Integration Integration Revival of the State? 20
Growing discontents on neoliberalism Neoliberal restructuring exacerbate social inequality Demand for the active role of the government Increasing role of the state required Social provision Conflict management National security Boosting economic dynamism 21 st Century is a knowledge-based information society Human capital Increasing demand for the public goods such as education and health 21
Regulatory State - re-regulation after deregulation (based upon ordoliberalism) - government both as rule-maker and umpire for market working - state autonomy and capacity needed Corporatist State - social concertation model (small European countries model) - state’s connectedness to both capital and labor - government intervention in markets Neo-developmental State - reconstruction of the developmental state - active role of the entrepreneurial state - second-stage catching-up system 22
• Globalizing capital: difficult to harness globalizing capital to national agendas • Capability enhancing development in knowledge-based economy: increasing importance of ideas, human capital in growth (new growth theory) (Evans, 2010) • Increasing importance of social and welfare policy for development • Broader set of “bottom up” state-society ties for developmental success 23
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