Whither the Developmental State in South Korea? Balancing Welfare and Neoliberalism

Abstract

Scholars of political economy have been debating the role of the Korean state in the economic development of the country, as the characteristics of a developmental state, a neoliberal state and/or a welfare state have appeared simultaneously in the various governments’ policies since the 1990s. This paper argues that although the nature, degree and extent of government intervention has varied from administration to administration, the basic stance of a developmental state has been retained while neoliberal and welfare policies have been used concurrently to further economic and social development. This coexistence of contradictory approaches reflecting alternative market economic systems was the product of a combination of government policies that has for the past 20 years provided the Korean government with the ability to deploy flexible policy mixes in response to changes in the political and economic environment and to maximise the outcomes of developmental policies.

Keywords:

• South Korea
• developmental state
• welfare
• liberalism
• economic development
• political economy

Acknowledgments

This work was supported by an Academy of Korean Studies Grant funded by the Korean Government (MEST) (AKS-2010-DZZ-3101). The authors are very grateful to anonymous referees for providing valuable suggestions for improving the paper. They would also like to express their gratitude to Mark Turner, Michael O’Donnell and Boon Chye Lee for their comments, advice and assistance.

Notes

1. This is one of the major differences between Korea, Japan and Taiwan. In Japan, banks were owned by business groups, and family businesses in Taiwan did not borrow heavily from the banking sector.

2. Towards the end of the Chun government’s term, public demonstrations of discontent with the repressive government intensified, reaching a peak in June 1987. The government subsequently announced democratic elections (Haggard and Moon, 1997).

3. Economic democratisation is a phrase that is frequently used in Korea to describe attempts to promote equity and equality in economic activities.

4. Since the big push into HCI, the interest rate applied to the official bank loans had been much lower than market interest rates.

5. For example, as a quid pro quo for the bailout, the IMF insisted that the Korean government remove most import restrictions and abolish the foreign ownership ceiling, which stood at 50 per cent.

6. The widening gap between the rich and poor in the Korean economy with the contraction of the middle income group has been termed the bi-polarisation of the economy.

7. The increased demand for contemporary Korean cultural products such as movies and popular songs in Asia has been termed the Korean Wave.