A political-economic analysis of the failure of neo-liberal restructuring in post-crisis Korea (original) (raw)
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The 1997 financial crisis created major ripples all across Korean society. The crisis has meant not only a halt to Korea's decades-long phenomenal economic growth, but also its subjection to comprehensive restructuring processes. Controversies and debates over the cause of the crisis notwithstanding, Korea has undergone profound transforma- tions, swallowing a bitter pill prescribed by global capitalism in general, and the IMF in particular. This paper examines the nature of prescription by the IMF and the char- acteristics of Korean governments in conjunction with the financial crisis. The paper criticizes the IMF's imposition of the same ready-made policies to Korea, and character- izes the Korean governments as 'a reckless knight to the world' and 'a docile student of the IMF school'. Although much has been written about the financial crisis, especially on the causes of the crisis and preventive measures, little attention has been paid to its social ...
Global Economic Review, 2005
In December 1997 the IMF offered Korea loans to help alleviate its financial crisis. These loans were accompanied by what the IMF called "extreme structural conditionality." Korea was required to replace its traditional East Asian economic system with a neoliberal model. We review economic performance in the neoliberal era. Growth has slowed, poverty and inequality have risen, and investment spending has stagnated, while foreign ownership of Korean firms and banks has skyrocketed. We argue that foreign investment has not helped Korea. For example, by leading a shift from corporate to consumer lending, foreign control of Korea's financial markets has constrained capital accumulation and helped create an excessively indebted household sector, while making it harder for the government to adopt progressive economic policies. We conclude that the eight year experiment with radical neoliberal restructuring has turned out well for foreign capital and wealthy Koreans, but has been a failure for the majority of Korea's people.
ECONOMIC CRISIS AND RESTRUCTURING IN SOUTH KOREA: Beyond the Free Market-Statist Debate
Critical Asian Studies, 2001
This paper, which examines the causes of the South Korean crisis in 1997-9 8 and the nature and consequences of the post-crisis restructuring process, looks critically at the neoliberal position but also at what the authors call the statist position (which celebrated and continues to defend the usefulness of industrial policy and state direction of the economy against neoliberal critics). While there are important differences between these approaches, the authors show that because both ignore the structural causes of South Korea's crisis, neither is able to explain, much less help overcome it. The paper then examines the economic, political, and social effects of the restructuring process, demonstrating how it has left the South Korean economy more dominated by foreign capital and the chaebol, and more dependent on exports and labor exploitation than before the crisis. As a result, South Korea appears headed for a new crisis. The authors conclude by highlighting ongoing worker resistance to the restructuring process and a movement-building strategy for advancing a worker/community-centered recovery and development program. South Korea has long been an ideological battleground for free market and statist development advocates. For decades the battle was over competing explanations for South Korea's economic success. Those arguments ended with the crisis of 1997-98 . Now the arguments mainly concern what went wrong in South Korea. Free market economists and the International Monetary Fund (IMF) blame the recent crisis in South Korea on misguided and corrupt investment and lending decisions produced by state industrial policies geared toward the growth of big family-controlled conglomerates (known as chaebol). In their view,
2004
The entire process of Korean economic development in the 1960s, 1970s, and 1980s demonstrated the possibility of economic development in the third world. The 1997 financial crisis led many to affirm that the Korean state had lost its ability to deal with domestic economic and welfare policies. Using Cerny's three "shifts" in the character and nature of the welfare state, this paper examines changes in the Korean state after the economic crisis and assess whether globalization and neo-liberal economic restructuring have resulted in the emergence of a new type of state in Korea. The results suggest that although globalization undermines the economic and political conditions on which the developmental state was based, there is no indication that the developmental interventionist state, which had been a crucial feature of Korea's industrialized process over the past few decades, has actually weakened. Rather, as compared with previous regimes, the state has become more...
2005
As late as October 1997 the IMF declared that the Korean economy was experiencing a temporary liquidity squeeze, not a solvency problem. Yet in December 1997 Deputy Managing Director Stanley Fischer declared that Korea suffered from a systemic "breakdown of economic relations" so complete that only radical economic restructuring could restore prosperity. The IMF attached what it called "extreme structural conditionality" to its loan agreements with Korea, demanding a complete and rapid transition from Korea's traditional East Asian economic model to a globally integrated neoliberal model. We subject the IMF's assertion that the allocative efficiency of the Korean economy had collapsed by 1997 to a number of empirical tests. The evidence does not support the IMF's systemic breakdown claim. We conclude that the IMF's imposition of "extreme structural conditionality" on Korea is best understood as an illegitimate and antidemocratic exercise of power designed to meet the needs of the IMF's key constituents rather than those of the majority of Korea's people.
Korea's Recovery since the 1997/98 Financial Crisis: The Last Stage of the Developmental State
New Political Economy, 2008
In this article, I challenge the view that Korea‟s successful macroeconomic recovery from the 1997/98 financial crisis was the result of market-oriented reforms and International Monetary Fund (IMF)-prescribed structural adjustments. I show that the recovery was mainly achieved by the „traditional strengths‟ of the pre-crisis development model, resting on export orientation and strong state capacity, rather than a transformation into a new „neoliberal‟ state. However, I also show that economic liberalisation and market reforms undermine state capacity and restrict a proactive and developmental role of the state. In short, the successful recovery was the last stage of the developmental state in Korea. The article is organised as follows. In section one, I provide a critical review of the relevant literature on Korean post-crisis restructuring and present my argument in more detail. In section two, I show that the main contributor in stabilising the economy and replenishing foreign currency reserves was Korea‟s exports, and not the process of regaining foreign investors‟ confidence through market opening and financial liberalisation. In section three, I illustrate the importance of state intervention for the economic recovery of Korea and, in section four, I argue that this state capacity is a product of the Korean developmental state, which has slowly been undermined by market-oriented reforms. I conclude in section five that Korea‟s successful recovery has been based on the two pillars of export orientation and state expansion, which face internal and external limitations, making a similar strategy unviable for other countries and even for potential future crises in Korea.
2004
Transformation of the South Korean State: Structural Changes of the State after the 1997 Financial Crisis The entire process of Korean economic development in the 1960s, 1970s, and 1980s demonstrated the possibility of economic development in the third world. The 1997 financial crisis led many to affirm that the Korean state had lost its ability to deal with domestic economic and welfare policies. Using Cerny's three "shifts" in the character and nature of the welfare state, this paper examines changes in the Korean state after the economic crisis and assesses whether globalization and neo-liberal economic restructuring have resulted in the emergence of a new type of state in Korea. The results suggest that although globalization undermines the economic and political conditions on which the developmental state was based, there is no indication that the developmental interventionist state, which had been a crucial feature of Korea's industrialization process over the past few decades, has actually weakened. Rather, as compared with previous regimes, the state has become more powerful and more interventionist. Despite a convergence in national economic policies toward the economic paradigm of the competition state, there are still unique domestic responses to globalization according to different national economic ideologies and past practices.