Neoliberalism and the Decline of the Developmental State.
administrative, policing, and military organizations headed and more or less well co-ordinated by
by Yun Tae Kim
Many statist analysts have attempted to demonstrate that economic performance for national
development has been led by the "autonomous state."(1) In these statist analyses, the Korean
state is conceived as being a unitary and internally cohesive actor driven by insulated bureaucratic
competence, and the bureaucratic state has maintained close ties with big business, but not in an
equal setting: the state is superior and dominant, while business is dependent on and subordinated
to the state. Thus the state is considered to have been able to intervene in business activities and
manage national-level macroeconomic strategies. However, it has been argued that the era of neo-
liberal triumph in the 1980s gave way to the radical structural change of the international political
economy. It is much harder for national governments to intervene and manage their economies
faced with the global division of labor, absence of capital control, s, and the operation of the
world financial markets.
Thus much controversy has recently come to surround the transformative role of the East Asian
states in the economy. In recent years some statist analysts also shifted their focus away from the
extreme "state autonomy" views that all states are autonomous from civil society and actually
have the capacity to impose their preferred policies.(2) The shift in emphasis from state power to
business power, from "state autonomy" to "embedded autonomy," is also apparent in the recent
work of Peter Evans.(3) But they hardly explain why and how the developmental state declined
with relation to the conglomerate power. In fact, it is necessary to focus on the political dynamics
of the state, big business and other social groups concerning the impacts of economic
liberalization, political democratization and globalization.
This article discusses the changing relationships between the state and the chaebol (large business
conglomerate) throughout economic liberalization and political democratization.(4) The reactions
of the chaebol to the state in economic policy-making make such research imperative. In the first
place, we shall begin with some theoretical discussion of the strengths and limitations of the state-
centred approaches. Second, this will look into the rise of the neo-liberal economists who drove
the liberalization programme and the resulting decline of the developmental state. The analysis
considers the changing relations between the state and business in Korea focusing on the
institutional arrangements between them. Therefore, we argue that the 1980s marked a
developmental course in the transition from the developmental state to state-business
coordination and collaboration.
The Strengths and Limitations of the State-Centred Approaches
A number of social scientists have paid attention to centralized state power in industrial capitalist
societies.(5) Theda Skocpol argues that the state and the entire dominant class share a common
stake in preserving the existing mode of production, but the state can be potentially autonomous
from the interests of the capitalist class and the existing mode of production. Influenced by the
German tradition of Max Weber and Otto Hintze, Skocpol defines the state as "a set of
an executive authority ... and autonomous structure - a structure with a logic and interests of its
own."(6) In this image the state is separated from its society and controlled by only a limited
number of insulated state elites.
In similar context, Peter Evans, in collaboration with Theda Skocpol and others, succeeded to
"bring the state back in" to the study of capitalist development.(7) The authors argued that
capitalism imposed limits on states, yet state elites possess some autonomy. Thus they suggest
that a more active, more relatively autonomous state is an essential component in advancing the
development of dependent countries. The state autonomy theorists in essence have attempted to
explain successful economic performance, focusing on potential national development led by the
state: I shall call this "state autonomy approach." They argue that a high degree of state
intervention to overcome the disadvantages of late development was a key factor for economic
development.
The statist perspective attributed Korea's remarkable economic growth to the strong state's role
in the economy, focusing on the industrial and financial policies carried out by the state. This
view highlights the crucial role of the state in the making of large business conglomerates under
the Park regime since the early 1960s. In particular, Amsden and Wade argue that East Asia was
never a paragon of free market ideology through capitalist industrialization. They argue that the
picture of a centralized state interacting with the private sector so as to secure development goals
conforms to the"developmental state theory" of East Asian economic growth.(8)
The statist analysts also demonstrate that it is a mistake to interpret the advent of the Korean
business conglomerates as the only critical breakthrough in the expansion of the free market as a
whole. They explain that Korea's state officials sought to harness the capability of private
corporations by assisting them and inducing them to invest in prioritized industries.(9) Thus
Korean big business was portrayed as being created, managed, and regulated by the state, and
was regarded as having limited autonomy. These views are closely connected with a political
logic for nationalist economic strategies as well as greater state intervention in the economy.(10)
However, the statist thesis has been criticized on the following grounds. The "state autonomy"
approach overlooks the institutional diversity of the state by characterizing the state as an
internally cohesive and unitary actor in the Weberian sense. It treats the state as the indivisible
unit of analysis, just as neoclassical economics treats the individual. However, the strong state, or
even an authoritarian regime, could not always insulate its state bureaucracy from social classes
that are often in conflict with one another. State officials are usually not autonomous actors;
rather, they typically respond to the demands of the dominant class or, occasionally, of the
militant lower classes. (11) As Migdal et al. argue, state and society tend to share power in most
developing as well as developed countries: states and societies are "mutually transforming."(12)
However, a globally generalized pattern of state-society relations may not exist. It seems more
plausible to assume that the relationship between states and societies varies considerably over
space and time.
There have been some efforts to overcome the limitations of the extreme version of the "state
autonomy" approaches that states had autonomous power over social groups. First, the "internal
organization" theory considers the state and big business as constituting an internal organization
which is hierarchical and manages transactions with the administrative process.(13) Thus, for
example, Korea's government officials and big business leaders coordinate their opinions and
interests through intermediate organizations.(14) Second, the "social network" theory also
suggests the reality of a concrete set of social ties, including formal, informal and organic (family,
kinship and regional) networks.(15) Thus the state apparatuses "are embedded in a concrete set of
social ties that binds the state to society and provide institutionalized channels for the continual
negotiation and re-negotiation of goals and policies."(16) In these models, the state-business
relations are complemented by horizontal ties established through formal, informal and organic
networks.
On the other hand, reformulating the statist analyses, there have been new theoretical attempts to
synthesize the state and the private economy by arguing "state capability" of what Michael Mann
calls "infrastructural power" to penetrate society and implement its decisions: I shall call this
"state capability approach." John Hall argued that the ability of a nation-state to operate within
capitalist industrial society is related to its ability to cooperate with national capitalists, and to
provide a massive social infrastructure of educational training and of class compromise that allows
for flexibility in the face of changing patterns of international economy.(17) Thus the states in
many East Asian countries are relatively, and increasingly, "despotically weak" but
"infrastructurally very powerful."(18)
The "state capability" approaches are typically utilized alongside the "state autonomy approaches,"
though the two are somewhat analytically distinct. Both argue that developmental states come
much closer to the ideal type of the Weberian bureaucracy. The central bureaucracy of the
developmental states has "selective meritocratic recruitment and long-term career rewards that
create commitment and a sense of corporate coherence."(19) However, the "state capability"
approaches suggested that the states are not always insulated from society as Max Weber argued
they should be. The state and society are closely connected in strong "social ties" capable of
resolving collective actions. In this context, Peter Evans attempts to develop Granovetter's
concept of "embeddness" that focused on actors and institutions, arguing the existence of social
ties.(20) Evans argue that only the combination of connectedness and autonomy, which he calls
"embedded autonomy," can make a state be developmental.(21)
However, Evans did not effectively pursue a theory of the complex, macro-structural foundation
of capitalist development in Polanyi's sense. He made little contribution to the understanding of
how social ties emerged and were established, and what sustains them. In general, this did not
explain the complex political dynamic of the "embedded autonomy" between the state elites and
social groups. Moreover, the statist analysts could not explain why state power over society has
gradually eroded with the expansion of social power in the current process of economic
liberalization and globalization.(22) Thus the argument needs to bring the state or bureaucracy
into a more complex political system and international context. If we intend to explain the
capacity and possibility of state power, we need to bring back the social: that is, a wider set of
social and political structures, class relations, and political dynamics in developed and developing
countries.
The Rise of the Neo-Liberal Economists
Fundamental changes were created in the transition from General Park to General Chun
between 1979 and 1981, when the metamorphosis took placed from a mercantilist economic
system to a market-oriented and more internationalized system. Why, then, did the Chun military
regime transform the economic system that would undermine the instrumental legitimacy of the
developmental state? We can address these questions by examining why the developmental state
of the Park regime faced economic crisis and political challenge in 1979 and 1980, and by
considering the way in which the Chun government allied with "neoliberal" economists and
bureaucrats who managed a fundamentally different style of industrialization.
In May 1980, the Chun regime consolidated its authoritarian power out of the predicament of
the Yusin regime, sustaining the ruling alliance of military elite, big bourgeoisie and state
managers. The military junta initially developed a populist image, making an effort to change the
government's major policies, and seeking to distance itself from Park's demand management
policies and industrial deepening. The Chun regime also criticized single-minded
"developmentalism" at the expense of social justice, welfare and democracy, mainly aiming to
shore up the popular support of the new military government.
Although the economic policies of the state are generally based on the overall pattern of capital
accumulation and capitalist development, there is always competition and conflict between
different economic classes and ideological fractions within the state apparatus. The new military
regime finally abandoned the old idea of a developmental state and decided to ally with
"neoliberal" economists, who had been influenced by the emerging ideologies of marketization
and privatization. Chun appointed them to positions of strategic command in the economic
bureaucracy. Thus the economic liberalization policies were implemented by neoliberal
economists such as Kim Jae Ik, a Stanford Ph.D., who became the senior advisor to the
President. Kim Jae Ik played a very important role in prompting the Economic Planning Board
(EPB) to move towards economic liberalization. Others included academic economists, Park
Yong Chul and Sakong Il, and EPB bureaucrats, Kang Kyong Shik, Kim Ki Hwan, Kim Man
Jae. They all had American Ph.D.s in Economics from US universities, more specifically, in
monetary economics.
The military junta gave Kim Jae Ik the unhindered right to govern the economy, while the
military regime enjoyed the full monopoly of political rent-seeking activities. The military junta
preferred academic economists to solve the economic crisis, rather than bureaucrats who caused
the problems. This marked a notable change from the first generation of economic bureaucrats
tinder Park who had been educated under the Japanese, and were more familiar with Friedrich
List and John Maynard Keynes. Many neoliberal economists were recruited from universities or
research institutes, and were closer to Ludwig Von Mises and Milton Friedman.(23) The
neoliberal economists were strongly supported by the World Bank and IMF, which supplied
Korea with a restructuring loan in return for economic liberalization policies. The worldwide
battle between Keynesians and neoliberals was neither an abstract technical debate between
economists, nor a purely economic policy confrontation.(24) This was a serious political battle of
two different ideologies.
The military junta continued to pursue the outward-oriented industrialization of the Park years
and undertook market reforms along the lines of the New Right policies of Thatcherism and
Reaganism. The macroeconomic stabilization programme of fiscal restraint, monetary control and
curbing wage increases were soon implemented. The neo-liberal economists believed that over-
investment and excessive money supply resulted in inflation, bankruptcy and debt crisis.(25) They
also thought that state intervention had caused a serious trouble in the late 1970s. Therefore, the
long-term policy of the neo-liberal economists was more than price stabilization. The
ideologically-oriented economists seriously attempted to adjust the state's role in the economy by
seeking a market-oriented style of economic management directed towards the globalization of
the world economy. Of course, there was also strong pressure from the Americans, who tried to
liberalize the Korean economy in an attempt to reduce the trade deficit between the two
countries.
The neo-liberal economists decided to introduce economic liberalization measures, including a
reduction in government intervention in product and factor markets, opening the domestic
market and privatizing the financial and public sectors.(26) Structural adjustment was carried out
with a series of deregulation measures, industrial restructuring, privatization and financial
liberalization.(27) The large chaebols partially controlled various commercial banks and owned
financial and investment companies after financial liberalization. Although the government
restricted single shareholders of nationwide commercial banks to 8 percent of total ownership,
except for joint venture banks, interventionist administrative guidance and credit allocation over
bank portfolios have been gradually reduced.(28) Financial liberalization marks the coming of age
for entrepreneurs and the close of the era of the developmental state.(29)
However, the early period of neoliberal reform was inherently confused and unstable. The Chun
government often exercised the discretionary, interventionist power over big business rather than
continual consultation and consensus between them, strategic management rather than market
conforming intervention.(30) In 1980 the government announced a series of economic packages
to reduce economic concentration: the rationalization of the chaebols' industrial structures; the
compulsory sale of non-essential affiliate firms; tight credit control over the chaebols; the
compulsory sale of non-business real estate owned by the chaebols.(31) Other important
measures to control business concentration was the introduction of the "real name deposit
system" and an American style, anti-monopoly law.(32) Nonetheless, the government more or less
failed to impose the heavy and chemical industrial investment adjustments and to achieve the
market-oriented reform by restructuring big business dominance.(33) As a consequence, Korea
exhibits the excessive concentration of economic power in the hands of big business.
The radical neo-liberal reforms entailed significant changes in the government's economic
leadership and consequently contributed to the power shift between government and business.
Moreover, the neo-liberal bureaucrats often challenged the political legitimacy of the authoritarian
military regime itself. When the minister of EPB, Kang Kyong Shik, became the chief of staff
under President Chun Doo Hwan, he unusually remarked in an interview that the "market
economy and liberal democracy are two sides of the same coin."(34) The neo-liberal state officials
seriously challenged the instrumental legitimacy of the "authoritarian" developmental state from
within.
Political Democratization and the Role of Bourgeoisie
As economic and financial liberalization ended the era of state-led industrialization, the military
regime also gave way to democratic transitions under popular pressure and Nordpolitik,
motivated by glasnost in the USSR. Hence, the authoritarian state power, repressive labor
control, and anti-communist rhetoric that had maintained the conservative social order of
Korean "developmentalism" were seriously challenged. The transition to democracy in Korea
was accompanied by consistent challenges from students, progressive Minjung movements, and
the opposition party from the mid-1980s onwards.(35) The middle classes, the economic
beneficiary of authoritarian developmentalism, including small business owners, white collar
workers in state and private sectors, urban professionals and intellectuals, finally turned against
the regime after the death of a student by police torture and Chun's public announcement of
opposition to constitutional amendment.
How, then, did the historically weak Korean bourgeoisie react to the democratic transitions?
Unlike the orthodox Marxist and liberal view of the role of the bourgeoisie as a primary agent of
democracy, the Korean capitalists rarely supported the introduction of full democracy. The
Korean bourgeoisie was politically very weak and invariably compliant to the military regime.
The political role played by big business in the political changes was less phenomenal. There is
no clear evidence that the business community engaged in the historical transformation toward
democracy. In this image dependency theorists postulate rather than demonstrate that the
bourgeoisie had a negative role in the formation of democracy and that the working class is
potentially revolutionary.(36) This assumption, however, is also belied by experience in Latin
America and elsewhere.(37) In fact, the bourgeoisie might support formal democracy, to a
greater or lesser degree, as long as they can profit from a more favorable business
environment.(38)
As noted above, Korea's political democratization was largely a product of popular movements
and an opposition party. On the other hand, as Bruce Cumings argues, the concessions of the
military and the US also played an indispensable role in the democratization process.(39) He
argues that the Korean democratization process is the result of conflict and negotiation amongst
the state, military and business elites, supported by the United States with the aim of
demobilizing the volatile popular sector.(40) It does not mean, however, that the Korean
bourgeoisie was automatically attracted to liberal democracy. The concessions may go only as far
as oppositional strength appears to make necessary. This is close to the view of Adam
Przeworski, who has persuasively argued that democratic capitalism rests on a class compromise
between labor and capital in which the interests of both sides are accommodated to a varying
degree.(41)
With the changing political climate after 1987, the large Korean chaebols began to assert their
political views ever more aggressively. There was a growing pressure on the state from big
business to provide business environments in which big business could prosper and institutions
that would allow the big bourgeoisie to influence important policy-making. In an unusual press
interview as president of the Federation of Korean Industries(FKI), Koo Ja Gyong, remarked that
"we will collect all political funds openly in the business community, and we will donate these
funds only to those parties supporting a free-market economy."(42) He also remarked that "it is
hard to donate these funds to the parties which had 12 assemblymen who are not supporting the
free-market system."(43) This announcement implicitly targeted the opposition parties, and
especially Kim Dae Jung's Party for Peace and Democracy.
Many significant changes have enhanced the social and political influence of the Korean chaebols,
and shifted some political emphasis away from the state towards society. The passing of
authoritarian hegemony in the 1980s has distributed power more broadly among a variety of
political parties and undercut the seemingly monolithic character of the state. The political
democratization process opened the way for the politically compliant chaebols to challenge the
authoritarian state. In the late 1980s the chaebols attempted the most significant challenge aiming
at reducing the state's power to function as a coherent neutral actor. The challenges from the state
within (the neoliberal economic bureaucrats) and from below (the Minjung bloc) were, at last,
followed by the challenges from the chaebols.
The Challenges From the Chaebol
The increasing capacity and economic power of Korean big business during the 1980s tended to
undermine "embedded autonomy" between the state and business. A growing conflict between
the state and big business emerged during the period of economic liberalization and political
democratization from the late 1980s. Many policy meetings, including presidential conferences
with business leaders and government officials, ceased in the late 1980s. In 1989 the FKI, the
association of the chaebols, did not donate political funds to the ruling party in protest against the
inconsistent policy of the Roh government. It was unimaginable that big businessmen would
openly express their complaints about the government under the military regimes. This raises
some important questions: why were some state bureaucrats in conflict with big business at some
stages, and how did the state and big business overcome the discordant relationship at other
stages? Did the state have its own set of interests or become closer to those of the chaebols? And
what happened to the power and capacity of the developmental state?
During the late 1980s the relationship between the state and the chaebols became increasingly
discordant, unlike the cases of the previous decades. Probably the most important reason is that
state support for big business during the Park and Chun years was changed as a result of the
political pressure that grew up during the post-democratization process. The Roh government
was under pressure from the opposition parties that demanded the elimination of policy loans for
the large chaebols, the implementation of the progressive taxation of large landholders, and the
establishment of the land public ownership system and the real name deposit system. The Roh
government had to appoint reform-minded economic cabinet members: for example, Cho Soon
(1989-1990), the deputy prime minister of EPB, and Moon Hee Gap, senior economic advisor at
President's office, who were supporters of more progressive reforms aimed at economic stability
and greater concern for economic justice such as land tax reform and the real name account.
Around the same time, the Roh regime desperately strove to form a majority party like the
Liberal Democratic Party (LDP) of Japan, which had been the ruling party from the merging of
conservative forces in 1955 until its defeats in July 1993. In January 1990, Roh's ruling party
entered into coalition with two opposition parties to establish the Democratic Liberal Party
(DLP) - a coalition consisting of the ruling party, Democratic Justice Party (DJP), and the
opposition parties of Kim Young Sam and Kim Jong Pil. The big business community also
strongly influenced, behind the scenes, the establishment of the DLP, just as the Japanese
keiretsu (business groups) had done.(44) This political realignment was followed by the
replacement of economic technocrat, Lee Seung Yoon, who was pro-big capitalists and
advocates of expansionist Keynesian economic policies. The government exercised more
repressive measures against the labor movement, including suppressing several major strikes
through massive riot police force actions in 1990. The implementation of the real name deposit
system, which aimed to curb illegal financial dealings was suspended indefinitely. Also, most
reform efforts to curb chaebol power were abandoned after the formation of the conservative
DLP.
On the other side, however, President Roh announced a special measure against real estate
speculation, which forced the chaebols to sell land after the government introduced a "bill for
the public land ownership system."(45) The DLP, the FKI and various business organizations
desperately opposed the enactment of the bill. The Roh regime thought, however, that land price
inflation should be halted through the compulsory sale of the chaebol's non-business real estates
in order to obtain electoral support.(46) The deputy prime minister, Choi Gak Gyu, also publicly
demanded the separation of the ownership and management of chaebol groups.(47) Around the
same time, the government intervened in economic policy making and blocked the new
investment licensing of Hyundai (chemicals) and Samsung (autos) for the fear of over-
investment.(48) The Roh government deliberately pursued the "industrial specialization" policy
which forced the chaebols to concentrate on core industries to avoid over-competition among
private capital, though this was finally withdrawn. This implied that the government violated its
own promise not to intervene in industrial policies, thus showing the government's
inconsistency. The economic policy dispute became an acute political battle. As the chaebols
increasingly distrusted the Roh regime's inconsistent policies, some chaebols actively sought to
change their economic power into political power.
In a very dramatic move, the Hyundai group chairman and former president of the FKI, Chung
Ju Yung, formed the Unification National Party (UNP) and gained 31 seats in the 299-seat
National Assembly in the national election in March 1992. The tycoon-turned-politician Chung
also ran for the presidency in December 1992, criticising bitterly the inefficiency and
incompetence of the Roh government. The large chaebols strongly challenged the ruling political
elites and tried to replace the military elites in maintaining a conservative social order.(49) The
Daewoo Group's founder and chairman, Kim Woo Chung, and the former president of the
POSCO, Pak Tae Joon, also attempted to run for President, but they reluctantly withdrew their
bids. In the 1992 presidential election, Chung was defeated by Kim Young Sam, gaining only 16
per cent support, leading to a criminal conviction for diversion of corporate funds and retaliation
against Hyundai by the government. What is remarkable, however, is that the chaebol posed a
serious challenge to those who ran the state, a situation totally unimaginable a decade ago.
Reacting to the bold presidential challenge from Hyundai's Chung Ju Yung in 1991, new President
Kim Young Sam clamped financial sanctions on Hyundai, denying its companies' access to low
interest loans from state-controlled banks and refusing permission either to float shares in Korea
or raise funds overseas. But the campaign was carefully managed to avoid throwing Hyundai and
the other chaebols into serious trouble. In 1995 the government finally lifted sanctions against the
Hyundai Group, which had been prohibited from raising funds overseas since 1992. This raises an
important question: why did the Kim government not let Hyundai go bankrupt as in the case of
Kukje in 1985? Obviously the most important reason is that the chaebol was too important to the
economy, with the top 10 chaebols, in 1995, accounting for about a quarter of Korea's GNP. In
other words, the interests of the state and the chaebols are becoming closer, though their
relationships are often discordant and conflict at some stages.
In general, the post-democratization process has restrained the power of the economic
bureaucracy and driven the state bureaucrats to manage a more politicized policymaking process.
The state had to respond to increasing social pressure to construct a "distributional coalition"
involving a substantial distribution of national income and expenditure. The state made an effort
to gain political support through the implementation of the "public land ownership system," the
compulsory sale of non-business lands held by the chaebols, and large-scale housing projects. The
chaebols also reacted to the state bureaucrats by increasing their influence in a more political way.
The chaebols sought to secure their business interests by supporting the establishment of the
DLP (followed by the dismissal of the reform-minded state officials), by creating their own party
such as the UNP, or by challenging for the presidential election. In consequence, increasing
democratization implied less controlling power for the state over society and the economy. This
raises an important question of the changing role of the state in regulating the economy.
Still the Era of the Developmental State?
The Korean state was said to maintain the ability of "discipline" over big business in the
industrialization process.(50) The idea of discipline to encompass the authoritarian political
structures has been a central characteristic of Korea's rapid industrial growth.(51) But the state's
capacity to discipline has not remained intact over time. As we have seen, it is quite evident that
economic liberalization and privatization during the 1980s gradually weakened state control and
consequently influenced the growth of conglomerates' power.
Manuel Castells predicted that in a rather Marxist way autonomous states would sow the seeds of
their own destruction.(52) Globalist analysts argues that nation states are affected by globalization
and that the activities of nation states are increasingly located in the global agenda.(53) As is well
known, the nature and scope of the sovereign authority of contemporary nation states are
increasingly shrinking at the global level.(54)
However, "globalization sceptics" (Giddens' term) such as Hirst and Thompson contend that
ideas of the integration of world economic activities exaggerate its extent and underestimate the
potential for independent national policies.(55) They emphasize the continuing importance of
the nation state, not as a sovereign power or economic manager in the traditional sense, but as
the basic foundation of legitimacy and the representative of authority to powers above and
below the national level.(56) In this image there may be something contradictory in banishing
the nation state from the economy, while at the same time enshrining it as the ultimate source of
sovereignty in international relations. Drawing on the "state capability" approach, Weiss and
Hobson agree that Japan no longer fits the "developmental state" image, but they contend that
Korea and Taiwan will not follow the consensus-style Japanese pattern of the "post-capitalist
developmental state."(57) The key feature is what they call the "flexible state" which maintains
"governed interdependence" between administrative and business elites. They assert, therefore,
that the East Asian states are not so much losing their autonomy as transforming it, but they
vaguely conclude that it is still too early to anticipate the final outcome.
Answers to the question are not, of course, so simple. Despite the government rhetoric about
liberal economic reforms, "there is currently a stalemate of many words without deeds because
of fears that liberalization would lead to disruptive changes, including job losses as
uncompetitive business are driven to the wall."(58) The situation made by neoliberal reformers,
as already noted, was inherently unstable and some economic policy was therefore not expected
to last. As we shall see, however, the demise of the developmental state now seems to be an
inevitable trend in Korea.
When Kim Young Sam took power in 1993, after campaigning for sweeping political and
economic reforms, many expected that the Kim government would continue the process of
deregulation and liberalization of the economy. However, there remained a constant policy
confrontation between neo-liberals and Keynesian-style economists. After a long debate,
President Kim finally decided to reorganize the economic ministries in 1994, abolishing the
EPB, creating the Ministry of Finance and Economy (MOFE), and streamlining the Ministry of
Trade, Industry and Energy. Furthermore, the government announced that no more state-led
economic plans and macroeconomic Keynesian strategies would be devised. The government
abandoned the Five-Year Economic Plans, which had been as central to Korean economic
identity since 1961 as Free Trade had been to British economic identity from the 1880s until at
least 1914. The long-term sectoral industrial policy, the main function of the developmental
state, eventually came to an end. Instead, the government planned a much longer-term economic
and social blueprint up to the year 2020, avoiding macroeconomic management in industrial
policy.(59)
At the same time, the first civilian government since the military coup in 1961, also promised to
reduce the power of old military elites and curb the family dominance and excessive expansion
of the chaebols in order to obtain popular support, just as his predecessors attempted to do. The
Kim government initially demanded the separation of ownership and management, and the
industrial specialization of the chaebol groups. However, the government's populist anti-chaebol
campaign did not last long. In December 1995 President Kim fell foul of his much publicized
promise to curb the chaebols. Kim had to expose the bribery of 35 chaebol leaders, including
Samsung's Lee Kun Hee and Daewoo's Kim Woo Chung, who had given a total of more than $1
billion to former Presidents Chun and Roh. But only three of the 35 chaebol leaders, Daewoo,
Dong-Ah and Jinlo, received suspended sentences and fines, and others were given a verdict of
"not guilty." The reason for this generosity, according to Attorney General Ahn Gang Min, was
that the imprisonment of leading businessmen could endanger the economy and jeopardize
Korea's position in overseas markets.(60) It should be evident that the more the state attempted
to curb the chaebols' expansion in order to gain popular support, the more difficult they found it,
in part because of the influence of big business on the economy, in part because of the common
interests between the state and the chaebol.
In general, the hierarchical and dominant relationships between the state and big business is
gradually being transformed in four significant ways. First, as already noted, there is mounting
evidence that the government is allowing the chaebols to go their own way, for example, by
abandoning the government restriction on investment licensing. The most controversial example
is the entry of Samsung to become Korea's sixth car maker in 1997 at a cost of at least $5 billion,
which the government approved in 1995.(61) By the mid-1990s the government finally
abandoned the "industry specialization" policy and the pressure for separation of ownership and
control, which aimed at curbing the chaebols' excessive expansion and family dominance. As a
result, the top 30 chaebols, whose dominance is resented by smaller companies, have been
allowed to spread into new strategic sectors such as telecommunications.(62) The decline of
policy instruments controlling the private sector implies a reduced dependence of big business on
the state.
Second, financial control is becoming a less effective method of controlling the chaebols as they
turn to direct financing in domestic and foreign financial markets, though it has been a powerful
policy tool in Korea. The chaebol groups not only maintained favourable access to the state-
controlled banks but also controlled various nonbanks financial institutions.(63) The top chaebols
can also use international capital markets at much lower rates than in Korea so that there is no
longer any need for them to entirely rely on domestic banks. In 1997, more than 90 per cent of
Korea's external debt of $120 billion is in the private sector and nearly two-thirds is short term, of
one year or less.(64) The chaebols also expect to be allowed to buy the troubled commercial
banks that have been badly managed by the government. In January 1997, the thirteenth largest
chaebol, the Hanbo Group, went bankrupt after the government-controlled commercial banks
lent Hanbo a total of $5.8 billion, which is twenty times its equity capital. The government
announced that the five state-controlled banks acted wrongly under the political influence of
high-ranking politicians and state bureaucrats. This incident made it necessary to privatize the
commercial banks, which would eventually be under the chaebol's control.(65)
Third, the Kim government continued to privatize state-owned companies such as Korea
Telecom and Korea Electric Power, while retaining controlling stakes in imitation of French-style
capitalism.(66) It is said that Korea will approach a balance between government and the private
sector on a par with Germany or France. But the reality goes further. To avoid favoritism and
obtain competent management, the government turned the selection process for the new
telecommunications industry to the big business leaders, which would have been unimaginable
several decades ago. In 1993, for example, the government openly asked the FKI to select the
largest shareholder and manager of the new telecommunications company.(67) The "relative
autonomy" of the Korean state vis-a-vis industrial conglomerates declined considerably, as did
the ability to control the behavior of the chaebols.
Finally, international flexibility has led the Korean chaebols to move capital and goods around
the globe, and the chaebols are increasingly freeing themselves from state control. Since the late
1980s the chaebols have aggressively launched foreign investment plans as export-led
industrialization based on domestic plants gives way to globalization based on broader
manufacturing bases. This spatial expansion of production systems is more likely to limit the
capacity and possibilities of national economic policies. Furthermore, the monetary and fiscal
policies of national governments are frequently dominated by movements in the global financial
markets.(68) In Korea where the IMF contributed $21 billion of a $57 billion loan package to
stabilize the currency, the US and the IMF demanded more financial liberalization and austere
monetary and fiscal policies.(69) Instead of being in control of its own national policies, the state
has had to adapt to the reality of the globalizing world economy.(70)
The Korean economic system, as noted, is more or less evolving from an old model
characterized by hierarchical and dominant relationships between military governments and
industrial conglomerates. Korea's state-business relations have now reached a turning point.
Although the system was in many ways patterned on Japan's capitalist developmental state, the
Korean government is now moving ahead with deregulation of the nation's financial,
automobile, electronics and telecommunications markets. There are also many signs that the
Japanese and Taiwanese governments are also working to achieve the policy reforms of
deregulation and competitiveness.(71) The capitalist developmental states in East Asia are
eventually coming to an end, and the weaker developmental capabilities of nation states are more
apparent in the second-generation Asian NICs: Malaysia, Thailand, and Indonesia.
The transformation to a new partnership formula in the deregulated and market-oriented
economy is unlikely to be the old style of capitalist development under mercantilistic state
guidance. Thus in recent years, many observers have heard a bold statement that MOFE's main
function these times is not industrial policy. The minister of MOFE, Kang Kyong Shik,
remarked: "state-led economic growth was to some extent valid during the past decades, .but the
role of government has to be changed in the fundamentally different [global] economic
environments."(72) The hierarchical, dominant relationships between the state and the chaebols
are being transformed into a new kind of symbiotic and collaborationist partnership between
them. This shows that the Korean chaebols are no longer simply the junior partner of the
government, but they have begun to develop institutional frameworks and interactions with the
state elites. The most fundamental result is that the post-developmental state has had to create
continual negotiation and consensus with big business.
State-Business Coordination and Institutional Arrangements
The stable and harmonious pattern of relations between the state and business under Park has
been replaced by a less harmonious and often conflictual set of relationships. This fundamental
change no longer corresponds with the statist interpretation deriving from the cases of Park's
developmental state. The post-developmental state has built a variety of problem-solving
partnerships with business associations rather than unilateral administrative guidance. The specific
patterns of development depends on the presence of an eroding state-directed corporatist system
in which state elites are willing to cede greater associational autonomy based on the authoritarian
political system. As government-business relations evolve, a more encompassing set of state-
society networks include institutionalized ties between the state and social groups rather than
personal ties.(73)
The Korean business community is still as closely connected with government as it has been, but
the state appears to be less powerful or aloof from societal interests than it was once thought to
be. While the national system of corporatist representation declines, various forms of non-market
economic governance are widely connected and multi-layered. According to the Ministry of
General Administration, over 100 councils, committees and commissions had been created and
attached to the government.(74) The recruitment of businessmen into these appointive
government positions still prevails. By 1995, members of the Korean business community have
joined 78 advisory, consultative and decision-making commissions attached to the
government.(75)
In recent decades the number of consultative bodies working with the government has grown
steadily. The 1990s saw a wave of expansion as governments sought to establish consensual
images in the public eye. A number of consultative institutions appeared, particularly the
Twentieth-Century Commission and the Globalization Commission. These commissions were
designed to function to coordinate national policy making in the transitional period of the
government. They brought together people in top positions from the corporate world, the
universities and the government to develop explicit policies and programmes for submission to
the President and the nation.
Other consultative bodies attached to government were mainly concerned with particular
industrial sectors and specific policy areas. The business executives directly involved in the
formulation of industrial policies through their sectoral associations.(76) The business community
also regularly organized semi-official meetings (Kandamhwoi) with relevant ministries in order to
coordinate important economic policies such as wages, interest rates, employment, and industrial
dispute.(77) The association of big business leaders, the FKI, has made an average of thirty formal
policy suggestions every year to the economic bureaucracy since the 1980s.(78) Michael Shafer
argued that the government accepted 90 percent of the FKI's policy suggestions since the
1990s.(79) The strong patterns of coordination and collaboration between business elites and the
state elites provide the social basis of an effective ruling coalition.
The established practice of consulting on the details of legislation meant that big businessmen
could be very influential in the consultative structures where diverse channels operated to
communicate between the state elites and business elites. This appears to contrast with the
Taiwanese government, which, according to some researchers, has developed a very weak policy
network linking the central economic bureaucrats with the private sector, relying more on public
enterprises and other public agencies.(80) It is argued that this weak network has made long-term
strategic bargaining with important private economic groups difficult in Taiwan. The wide-
ranging policy networks in Korea show the growing tendency towards the state-business
coordination and cooperation that replaced the state-led policy-making process.
Apart from the official consultative bodies, the business community operates a system of
continual consultative meetings with senior policy makers in government. Before many major
policy initiatives, elaborate consultations are taken, involving the creation of new governmental
or related commissions, reports from distinguished policy groups of experts, and scrutiny of the
relevant organized interests. Therefore the business community is already fully involved in the
policy-making process in addition to the proliferation of consultative organizations. In the
process of consultation, what is remarkable is the increasing strength of business leaders in key
decision areas. Many important economic policies, despite many official consultative bodies, still
tend to be coordinated through the peak level meetings between the top governmental officials
and the top business leaders.
However, there is often a radical disjunction between the vague consultation that precedes a
policy decision and the hard politicking that follows it. Depending on the strength of the
complaint or protest of relevant social groups, policy proposals were often changed at the last
stage or even withdrawn. In 1997, for example, despite the government claim of neutrality, the
ruling New Korea Party abruptly enacted the labor reform law, including the flexible labor
market policy, in favor of the big business, in a semi-secret session from which opposition
assemblymen were excluded. Under pressure of a general strike, however, the government finally
had to revise the law to allow more unionization rights and job security than had previously been
proposed.(81)
It is obvious that there is still a factor of flat in the conduct of the government bureaucracies and
a great deal of public posturing on the part of organized interests. The process of policy-making
by consultation-flat-revision is still some distance away from one based on "intensive and
ongoing negotiation with social groups" in Peter Evans' sense of "embedded autonomy."(82)
However, it is quite evident that the importance of government "discipline" over private firms
(Amsden), or the "governed market" system in strategic industrial policies (Wade) is considerably
declining. As is well known, Japan also no longer fits the old style of "developmental state"
(Weiss and Hobson, 1995). It can be said that Korea and Taiwan also follow the consensus-style
Japanese pattern of the "post-capitalist developmental state."(83) While the era of the
developmental state ended in the 1990s, a new era of state-business coordination and
collaboration gradually began.
Conclusions: Beyond Statism
As the Korean economy has been transformed from a mercantilistic system to more market-
oriented system since the 1980s, the Korean state has tended to lose its leadership role in
managing industrial and financial policy over big business. The neo-liberal bureaucrats now seem
to be adamant that the iron grip of the state on the economy needs to be loosened. This
economic liberalization trend has resulted in fundamental changes in the relationships between
the state and the chaebols. A few conclusions may be drawn.
First, the state has become a less internally cohesive actor, unlike the Weberian sense of the statist
analysts. The state has often had divisible units of elite groups within the institutional diversity of
the state apparatuses. The rise of neo-liberal economic bureaucrats and the subsequent conflicts
with the traditional economic bureaucrats showed that there have existed continual competitions
and conflicts of different ideologies and economic strategies. The triumph of neo-liberal
economists and the continuing liberalization policies resulted in the erosion of state power to
control and regulate big business. These changes took place within the framework of fundamental
shifts in the character of the economic system in the course of liberalization and the post-
developmental state.
Second, the post-democratization process has made the state more responsive to popular
demands and has subsequently led to the politicization of economic policymaking process. The
consistency of the Korean state's economic policies, which is adamantly pro-big capital and anti-
labour, was seriously challenged by the Minjung movements and the opposition party. As the
political mapping of the social powers changed, the state elites had to concentrate more on
obtaining popular support, unlike the cases of the authoritarian regimes. These changes highlight
the fact that the state is very much subject to the characteristics of the political regime and class
relations. This is one of the main reasons why state-business relations have became ever more
politicized and unstable. Unlike the plain statist assumption, the state could not always insulate its
bureaucracy from social groups that are often in discord with one another. Korean big business
has reacted to the state in a more politicized way, supporting the establishment of the new
conservative ruling bloc, forming a political party, and even running for the presidency. Big
business is more willing to criticize the government policy and even to attempt to challenge it. In
any sense, the state could not maintain the old-style of the developmental state and the
authoritarian political system, resulting in a significant decline of the state power to dictate to civil
society.
Finally, the liberalization of economic relationships has considerably eroded the capability and
possibility for the state to direct a whole range of macroeconomic policies. As in Japan and
Taiwan, the signs are increasingly apparent that the old-style of the developmental state in Korea
has significantly declined. The government has attempted to pursue the consensus-style of policy-
making rather than bureaucratic domination. As we have seen, the state elites and capitalists have
developed various institutional networks and interactions between them. The growing presence of
the "interconnected structure" between the state and social groups makes it harder for state
bureaucracy to sustain coherent and cohesive state apparatuses in the Weberian sense. But the
demise of state power does not necessarily mean that organized social groups will dominate the
bureaucratic state. The transitional form of state-society relation suggests a more complex
transformative structure of social and political interconnectedness, rather than the repositioning
of decision-making processes.(84) Thus the state-business relation should be seen as a function of
strategic alliances between the political and economic actors, constrained by the political dynamics
of regime and social classes.
Notes
(1.) Jones and SaKong, Government, Business and Entrepreneurship in Economic
Development: The Korean Case, Cambridge, MA: Harvard University Press, 1980; Chalmers
Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy; 1925-1975, Stanford,
CA: Stanford University Press, 1987; Alice Amsden, Asia's Next Giant: South Korean and Late
Industrialization, London: Oxford University, 1989; Robert Wade, Governing the Market:
Economic Theory and the Role of the Government in East Asian Industrialization, Princeton:
Princeton University Press, 1990; Stephan Haggard, Pathways From the Periphery: The Politics
of Growth in the Newly Industrializing Countries, Ithaca: Cornell University Press, 1990.
(2.) Chung-in Moon, "Changing Patterns of Business-Government Relations in South Korea," in
A. MacIntyre, ed., Business and Government in Industrializing Asia, London: Alien and Unwin,
1994; Haggard, Maxfield and Schneider, "Theories of Business and Business-State Relations," in
S. Maxfield and B. R. Schneider ed., Business and the State in Developing Countries. Ithaca, NY:
Cornell University Press, 1994.
(3.) Peter Evans, Embedded Autonomy: States and Industrial Transformation, Princeton, NJ:
Princeton University Press, 1995.
(4.) Here the concept of the chaebol is defined as a large diversified business group that is
owned and controlled by a family or closed kinship group.
(5.) Stephen Krasner, Defending the National Interests: Raw Materials Investments and US
Foreign Policy, New York: Praeger, 1978; Theda Skocpol, States and Social Revolutions: A
Comparative Analysis of France, Russia and China, Cambridge: Cambridge University Press,
1979; E. Nordlinger, The Autonomy of the Democratic State, Cambridge, MA: Harvard
University Press, 1981; Michael Mann, The Sources of Social Power Vol 1, Cambridge:
Cambridge University Press, 1986.
(6.) Theda Skocpol, States and Social Revolutions, Cambridge: Cambridge University Press,
1979, pp. 27, 29-30.
(7.) Evans, Rueschemeyer, and Skocpol ed., Bringing the State Back In, Cambridge, Cambridge
University Press, 1985.
(8.) See Gordon White, Developmental States in East Asia, London: Macmillan, 1988; Adrian
Leftwich, "Bringing Politics Back In: Toward a Model of the Developmental State," Journal of
Developmental States, vol. 31, no. 3, 1995, pp. 400-27.
(9.) In this sense, Amsden argues that Korea's economic growth is a classic example of "late-late
industrialization," and embodies all the elements common to other developing countries as well
as the developed countries. Alice Amsden, Asia's Next Giant, 1989, pp. 4-23; see Robert Wade,
Governing the Market, 1990; L. Weiss and J. Hobson, States and Economic Development: A
Comparative Historical Analysis, Cambridge: Polity, 1995.
(10.) The statist analysts in political science and international relations generally theorizes the
changing role of the state in dualistic terms: the world is becoming globalized at the level of
economy and culture but the nation state remains the primary location for sovereignty and
policy making. See Stephen Krasner, Defending the National Interest: Raw Materials
Investments and US Foreign Policy, New York: Praeger, 1978; D. Calleo, Imperious Economy,
Cambridge, MA: Harvard University Press, 1982.
(11.) W. G. Domhoff, The Power Elite and the State, New York: Aldine De Gruyter, 1990.
(12.) Joel S. Migdal et al., State Power and Social Forces: Domination and Transformation in the
Third World, Cambridge: Cambridge University Press, 1994: pp, 293.
(13.) Oliver E. Williamson, The Economic Institution of Capitalism: Firms, Markets and
Relational Contracting, New York: The Free Press, 1985; see Chung H. Lee, "The Government,
Financial System and Large Private Enterprises in the Economic Development of South Korea,"
World Development 20, 1992.
(14.) Roy Shin, "The Role of Industrial Policy Agents: A Study of Korean Intermediate
Organization as a Policy Network," Pacific Focus 6, 1991; for a discussion of Japan, see Daniel
Okimoto, Between MITI and the Market: Japanese Industrial Policy for High Technology,
Stanford, CA: Stanford University Press, 1989.
(15.) Mark Granovetter, "Economic Action and Social Structure: The Problem of
Embeddedness," American Journal of Sociology, 91, 3. 1984, pp. 481-510; Walter W. Powell, and
L. Smith Doerr, "Networks and Economic Life," in N. Smelser et al. ed. The Handbook of
Economic Sociology. Princeton, NJ: Princeton University Press, 1994.
(16.) Peter Evans, "The State as Problem and Solution: Predation, Embedded Autonomy, and
Structural Change," in Stephan Haggard and Robert Kaufman ed., The Politics of Economic
Adjustment. Princeton, NJ: Princeton University Press. 1991, pp. 12.
(17.) John Hall, "States and Economic Development," in Hall ed., States in History. Oxford:
Blackwell, 1986.
(18.) John Hall, "States and Economic Development," 1986, pp. 154-76.
(19.) Peter Evans, Embedded Autonomy, 1995, pp. 30.
(20.) Mark Granovetter, "Economic Action and Social Structure: The Problem of
Embeddedness," 1984, pp. 481-510.
(21.) Peter Evans, Embedded Autonomy, 1995, pp. 12.
(22.) Michael Mann, ed., The Rise and Decline of the Nation State, Oxford: Blackwell, 1990.
David Held, ed., Democracy and the Global Order: From the Modern State to Cosmopolitan
Governance, Cambridge: Polity, 1995.
(23.) The ideological attack of the neo-liberals was reinforced by the growing impotence of
Keynesian economic policy in the 1970s. The Nobel Prize for economics also supported the neo-
liberals by awarding it to the Chicago economists of militant ultra-liberalism, Fredrich von Hayek
and Milton Friedman in 1974 and 1976 respectively. After 1974 the neo-liberal economists were
on the offensive. For example, the Chilean military dictatorship allowed US advisers, the so-called
`Chicago Boys," to install an unrestricted free market economy after the overthrow of a socialist
government in 1973. See Eduardo Silva, The State and Capital in Chile: Technocrats, Business
Elites and Market Economics, Boulder: Westview. 1994.
(24.) For the neo-liberal think-tanks in Britain, see Richard Cockett, Thinking the Unthinkable:
Think-tanks and the Economic Counter-Revolution, 1931-1983, London: Harper Collins, 1994.
(25.) The EPB figures shows that between 1976 and 1979, about 77 per cent of capacity
expansion in the manufacturing sector was invested into heavy-chemical investment.
(26.) Chung-in Moon, "The Demise of the Developmentalist State: Neoconservative Reforms
and Political Consequences," Journal of Developing Societies 4, 1988; Stephan Haggard,
Pathways From the Periphery, Ithaca: Cornell University Press, 1990.
(27.) Chung-in Moon, "Changing Patterns of Business-Government Relations in South Korea,"
1994; cf. Haggard and Kaufman, ed., The Politics of Economic Adjustment. Princeton, NJ:
Princeton University Press, 1992.
(28.) The exertion of state power was structurally constrained by the very size and capacity of the
large chaebols. In the face of the economic crisis, for example, the government had to issue the
Tax Reduction and Exemption Law to grant tax privileges to the chaebols in December 1985. At
the same time, the government also revised the Bank of Korea Act to provide cheap "special
loans" to the banks in which the chaebols were involved. These two measures provided many
chaebols with financial privileges, leading to increasing economic concentration. See Lee Jong
Jae, Chaebol Iroykso [Chaebol's curriculum vitae], Seoul: Hankook Ilbosa, 1993, pp. 316-17.
(29.) Jung-en Woo, The Race to the Swift: State and Finance in Korean Industrialization, New
York: Columbia University Press, 1991; Koo and Kim, "The Developmental State and Capital
Accumulation in South Korea," in Appelbaum and Henderson, ed., State and Development in
the Asian Pacific Rim, London: Sage, 1992.
(30.) Moon, "Changing Patterns of Business-Government Relations in South Korea," 1994, pp.
151. State control of the financial system still had the power to create or destroy a chaebol. As
the case of the Kukje Group's sudden breakdown demonstrates, the distribution of bank credit
was the key instrument for controlling big business. In 1985 the Chun regime refused to approve
emergency bank loans to cover the Kukje Group's debt because Kukje's founder and chairman,
Yang Jung Mo, made insufficient political contributions both to Chun and his brother, who was
then chief of the Saemaul (New Village) Movement Center. The seventh largest chaebol, Kukje,
soon collapsed as a result of the withdrawal of government support for bank credit. Sec Lee
Jong Jae, Chaebol Iroykso [Chaebol's curriculum vitae], 1993.
(31.) Dong-Ah Ilbo [Dong-Ah Daily], 28 September 1980.
(32.) It is also important to note that the FKI played an important role in blocking the attempt
to enforce a "real name deposit system" which aimed to restrain the informal financial markets
and to raise tax revenues through the investigation of financial transactions under false names,
and illicit wealth accumulation through the curb market speculation (Dong-Ah Ilbo, 27 October,
1982; Dong-Ah Ilbo, 1 November, 1982).
(33.) Rhee, Jong-Chan, The State and Industry in South Korea.' The Limits of the Authoritarian
State, London: Routledge, 1994.
(34.) Far Eastern Economic Review, 8 June 1984.
(35.) The Minjung movement, which was an alliance of popular opposition, began in the mid-
1970s and became a major social, political and cultural movement throughout the 1980s. For
more discussions, see Hagen Koo, "The State, Minjung, and the Working Class in South Korea,"
in H. Koo, ed., State and Society in Contemporary Korea, Ithaca: Cornell University Press, 1993;
K. M. Wells, South Korean Minjung Movement, Honolulu, Hawaii: Hawaii University Press,
1995.
(36.) Guillermo O'Donnell, Modernization and Bureaucratic Authoritarianism, Berkeley:
University of California Press, 1973; A. G. Frank, "Asia's Exclusive Models," Far Easter
Economic Review, 25 June, 1982.
(37.) In 1986, Guillermo O'Donnell and Philippe Schmitter published a series of four volumes on
Transitions from Authoritarian Rule. One might be surprised to find that their focus has now
shifted to elite behavior. Structural factors such as multinational capital and particular classes are
considered secondary or are unemphasized in the transition from authoritarian rule. The authors
argue that it is elite dispositions, calculations and pacts that largely determine whether or not an
opening will occur at all. In fact, O'Donnell's recent reorientation reflects his change into a kind
of contingent choice theorist. See O'Donnell et al., Transitions From Authoritarian Rule.'
Prospects for Democracy, 4 Vols., Baltimore: Johns Hopkins University Press, 1986.
(38.) For a discussion of a Latin American case, F. H. Cardoso, "Entrepreneurs and the Transition
Process: The Brazilian Case," in G. O'Donnell et al., Transitions From Authoritarian Rule, 1986,
pp. 147-150.
(39.) Bruce Cumings, "The Abortive Abertura: South Korea in the Light of Latin American
Experience," New Left Review 173, 1989, pp. 5-32.
(40.) For the state autonomy approaches, see James Cotton, "From Authoritarianism to
Democracy in South Korea," Political Studies, 27, 1989; Tat Yan Kong, "Democratisation and Its
Aftermath: Transition and Continuity in South Korea," in Kim and Kong ed., Korea in
Transition, London: Macmillan, 1997.
(41.) Adam Przeworsky, Capitalism and Social Democracy, Cambridge: Cambridge University
Press, 1985.
(42.) Dong-Ah Ilbo, 26 October 1988.
(43.) Yoo Yung Eul, "Kodaiyodang minjujawidang'gwa chaebol" [The Grand Ruling Democratic
Liberal Party and Chaebol], Sindonga, March 1990, pp. 203.
(44.) Jang Jip Choi, "Political Cleavages in South Korea," in H. Koo ed., State and Society in
Contemporary Korea, Ithaca: Cornell University Press, 1993, pp. 48.
(45.) Dong-Ah Ilbo, 8 May, 1990.
(46.) Dong-Ah Ilbo, 14 April, 1990.
(47.) Interview with Wolgan Chosun, September 1991, pp. 362-70.
(48.) Dong-Ah Ilbo, 29 June, 1990.
(49.) Jang Jip Choi, "Political Cleavages in South Korea," 1993, pp. 47.
(50.) Amsden, Asia's Next Giant, 1989.
(51.) Stephan Haggard, Pathways from Periphery, 1990, pp. 184.
(52.) Manuel Castells, "Four Asian Tigers with a Dragon Head: A Comparative Analysis of the
State, Economy, and Society in the Asian Pacific Rim," in Appelbaum and Henderson, ed., State
and Development in the Asian Pacific Rim, 1992, pp. 66.
(53.) David Held, Democracy and the Global Order: From the Modern State to Cosmopolitan
Governance, Cambridge: Polity, 1995; Leslie Sklair, Sociology of the Global System, Hemel
Hempstead: Harvester Wheatsheaf, 1995.
(54.) Peter Dicken, Global Shift: The Internationalization of Economic Activity, London: Paul
Chapman, 1992; John Dunn, ed., The Crisis of the Nation State? Cambridge: Cambridge
University Press, 1995; Susan Strange, The Retreat of the State.' The Diffusion of Power in the
World Economy, Cambridge: Cambridge University Press, 1996.
(55.) Paul Hirst and Gramham Thompson, Globalization in Question, Cambridge: Polity, 1996.
Sec also R. Boyer and D. Drache, States Against Market: the Limits of Globalization. London:
Routledge, 1996; S. Berger and R. Dore, National Diversity and Global Capitalism. Ithaca:
Cornell University, 1996; L. Weiss, "Globalization and the Myth of the Powerless State," New
Left Review 225, 1997.
(56.) Hirst and Thompson, Globalization in Question, 1996, pp. 143-49.
(57.) Weiss and Hobson, States and Economic Development, 1995, pp. 190-195.
(58.) Financial Times, 31 October 1997.
(59.) Dong-Ah Ilbo, 20 July 1995.
(60.) Dong-Ah Ilbo, 17 December 1996. In September 1997, the Kim Young Sam government
announced a special amnesty for 23 leading businessmen who had been convicted of bribing
former Presidents Chun and Roh. The government said the amnesty was necessary because the
businessmen needed to be cleared of their criminal records in order to help Korea recover from
a slowing of its economy (Dong-Ah Ilbo, 30 September 1997).
(61.) Far Eastern Economic Review, 22 June 1995, pp. 45-46.
(62.) Dong-Ah Ilbo, 16 May 1995.
(63.) The government gradually eased the bank credit restrictions of state-controlled banks on
the major chaebols. By 1996 the top 5 chaebols could have a 4.88 per cent share of total bank
credit and the 30 conglomerates had a 9.63 per cent share in total. Dong-Ah Ilbo, 26 April 1996.
(64.) Financial Times, October 29 1997.
(65.) Dong-Ah Ilbo, 31 January 1997.
(66.) Business Week, 31 July 1995, pp. 34.
(67.) Maeil Kyongje Sinmun [Maeil Economic Daily], 29 February 1994.
(68.) In Thailand, for example, international finance met with the virtual absence of foreign
investment guidelines, leading to intense speculative activity in the property sector, ultimately
contributing to the currency crisis of 1997.
(69.) Maeil Kyongje Sinmun, 13 December 1997. Following the foreign currency crisis in
Thailand, Malaysia, Indonesia, and Korea in 1997, the IMF has poured $35 billion at East Asian
countries. The Asian economies are determined to stick to the path of global integration. No
recent crisis has led a country to withdraw from international trade and finance, The Economist,
13 December 1997.
(70.) For the discussion about financial globalization and the role of the state, see E. Helleiner,
States and the Reemergence of Global Finance, Ithaca: Cornell University Press, 1994.
(71.) For Japan's recent deregulation reform, see The Economist, 10 May 1997, pp. 77-8.
(72.) Interview in Sindonga, April, 1997, pp. 166-73.
(73.) Peter Evans, "State Structures, Government-Business Relations, and Economic
Transformation," in Schneider and Maxfield ed., Business and the State in Developing
Countries, 1997; Karl J. Fields, "Strong States and Business Organization in Korea and Taiwan,"
in Schneider and Maxfield ed., Business and the State in Developing Countries, 1997.
(74.) Ministry of General Administration, various reports, 1995.
(75.) Ministry of General Administration, various reports, 1995.
(76.) For the case of Korea Automobile Industry Association, see Yun-Han Chu, "The
Realignment of Business-Government Relations and Regime Transition in Taiwan," in A.
MacIntyre ed., Business and Government in Industrializing Asia. London: Allen & Unwin, 1994.
(77.) FKE [The Federation of Korean Employers], Hankuk kyonchong ispnyonsa [The 20 Years
History of the FKE]. Seoul: FKE, 1990, pp. 612-90; FKI [Federation of Korean Industries],
Junkyongyon 30 nyonsa [The 30 Year History of the FKI]. Seoul: FKI, 1991, pp. 521-657.
(78.) FKI, Junkyongyon 30 nyonsa [The 30 Year History of the FKI], Seoul: FKI, 1991.
(79.) Michael D. Shafer, Winners and Losers: How Sectors Shape the Developmental Prospects of
States, Ithaca, NY: Cornell University Press, 1994; Karl J. Fields, "Strong States and Business
Organization in Korea and Taiwan," in Schneider and Maxfield ed., Business and the State in
Developing Countries, Ithaca, NY: Cornell University Press, 1997.
(80.) R. Wade, Governing the Market, 1990, pp. 296; Sec Cheng, Tun-jen, 1990. "Political
Regimes and Development Strategies: South Korea and Taiwan," in Gary Gereffi ed,
Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia. Princeton:
Princeton University Press, 1990.
(81.) Dong-Ah Ilbo, 8 March, 1997.
(82.) Peter Evans, Embedded Autonomy, 1995, pp. 12.
(83.) Chung-in Moon, "Changing Patterns Between Business-Government Relations in South
Korea," 1994; Yun-han Chu, "The Realignment of Business-Government Relations and Regime
Transition in Taiwan," 1994.
(84.) Peter Evans, Embedded Autonomy, 1995.
Yun Tae Kim, Asiatic Research Center, Korea University, Seoul. I would like to thank Leslie
Sklair, Nicos Mousclis, Aidan Foster-Carter, Patrick MacGovern, and Keith Taylor for helpful
comments.
Publication Information: Article Title: Neoliberalism and the Decline of the Developmental
State. Contributors: Yun Tae Kim - author. Journal Title: Journal of Contemporary Asia. Volume:
29. Issue: 4. Publication Year: 1999. Page Number: 441. COPYRIGHT 1999 Journal of
Contemporary Asia Publishers; COPYRIGHT 2004 Gale Group