Hyun-Chin Lim Seoul National University & Jong-Cheol Kim - - PowerPoint PPT Presentation

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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

• Background
• Research Questions
• Arguments
• Theoretical Resources
• Rise and Fall of the Korean

Developmental State

• Resurge of the Developmental State?
• Conclusions

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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)

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 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

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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

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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

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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

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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

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Weberian State Structure Dimension

Degree of Rationalization of State Bureaucracy HIGH LOW

Weber’s Ideal-typical Rational- Legal Bureaucracy Ideal-typical Patrimonial State

Marixan Class- State Dimension

Degree of Embeddedness

• f State in Civil

Society: Network with Dominant Class, etc.

HIG H

Developmental State Bourgeois Clientelist State

LOW

Overdeveloped Post-Colonial State Predatory State

• State autonomy and state capacity

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

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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

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• 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

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 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

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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

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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

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• President Kim Dae Jung (DJ)

– 1998-2003

• Crisis Management

– Neoliberal reform without reservation – Revising macroeconomic coordination – Lack of long-term perspective

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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

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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

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 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

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Quasi Civil. Govt (1987-1992) Democratic Transition Segyehwa (1993-1997) Globalizatio n Drive DJ-nomics (1998-2002) Roh Moo-Hyun (2003-2007) Lee Myung- Bak (2008-Current) Deepening Global Integration Revival of the State? Neoliberal Reform Global Integration

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

 21st Century is a knowledge-based information society  Human

capital

 Increasing demand for the public goods such as education and

health

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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

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• 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

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Given the changing context of development, return to the past model is neither possible nor desirable Still path dependent development Utilizing strength of the old developmental state

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Korean state is still strong

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Identifying problems and setting agendas

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Coordinating business and society to achieve national goals

Curing weakness of the old developmental state

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State embeddedness extended to business and society together

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Complementary combination of competent, coherent bureaucracy and dense ties to civil society actors and business elites

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Rise and fall of the Korean developmental state Neoliberal reforms and increasing backlash Growing demands for State’s active roles Return to the old model is neither possible nor desirable Given the changing context of development, existing state-society relation needs to be extended to broader civil society groups Development is redefined as a political problem, not as a technical fix or economy

• nly matter

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