The limits of economic globalization in East Asian developmental states

Abstract

In an attempt to adjust to economic globalization or internationalization, East Asian developmental states have liberalized their domestic economic systems, accelerating the introduction of the free‐market ideology. Despite their plan to establish the internationally compatible open‐market economy, however, the extent to which they can advance economic liberalization is limited. Political and economic burdens that the developmental state's extensive intervention in the market has incurred in the course of state‐led mercantile economic development, make it impossible for those states to execute full‐scale economic liberalization. The South Korean case clearly shows this. The Korean developmental state retains two major economic burdens: the exclusive ownership and the poor financial structure of the chaebôl. Insofar as Korean big business preserves those weak spots, the government cannot surrender the power of regulation despite its spontaneous implementation of the economic liberalization policy. In addition, the common ‘egoistic’ interests which government bureaucrats and the political class share also limit the degree to which economic liberalization policy can be implemented. The degree of state intervention in the market in Korea has been deeper than that in Japan which pioneered Asian developmental statism, and, thus, the political and economic burdens it has incurred for itself are heavier. Consequently, the East Asian developmental state cannot entirely withdraw its intervention in the market. The ‘support’ of industries is likely to diminish, but ‘regulation’ for the formation of the autonomous market will increase. For the Korean developmental state, globalization and economic liberalization are political economic slogans to re‐launch economic growth and to elevate the international economic competitiveness of industries under the initiative of the state, and motivated by nationalistic reasons. Hence, the role of the state in the market is still far from becoming redundant even in the tide of globalization and economic liberalization in the case of South Korea, where the legacy of strong developmental statism remains considerable.     

The new Korean political economy: beyond the models of capitalism debate

Abstract

A key theme within the literature on the evolution of the Korean political economy since the 1997/8 crisis has been the extent to which Korea remains a ‘developmental state’ or has pursued radical neoliberal reform. These debates have not only reflected a concern with understanding the Korean economy but with a wider set of questions relating to the future of capitalist diversity within a globalized economy. By the late 1980s Korea had come to be regarded as a model of successful state-led late capitalist development. Korean modern economic history has insured that questions relating to the extent that it has pursued neoliberal reform have been of keen interest to students of political economy globally. This paper argues that substantive neoliberal reform has taken place in Korea since 1997. The thesis that a new ‘developmental state’ is in process of consolidating itself is simply wrong. However, the state's reform program interacted with material conditions and political coalitions at the meso level in a complex and uneven manner. In certain critical sectors, such as finance, a neoliberal regulatory regime has been consolidated. In others, such as telecommunications, developmentalist regulatory structures have proven to be highly resilient. In order to fully understand the complexity of the contemporary Korean political economy it is necessary, therefore, to prioritize the importance of meso-level analysis.     

Following in China's footsteps? The political economy of North Korean reform

Since the coming to power of Kim Jong Un in 2012, the North Korean government has recently announced, and to some degree has implemented, a new set of economic management policies known as the June 28th measures in 2012 and the May 30th measures in 2014. Both of these sets of measures seek to build upon the abandoned reforms of the early 2000s through restructuring North Korea's highly inefficient collective farm and state-owned enterprise management system. In addition, the government has intensified ongoing efforts at building special economic zones for the purpose of attracting foreign investment. As such, the country is attempting to emulate the reforms adopted by China in the late 1970s. Although the success of these efforts is by no means guaranteed, they do serve to question mainstream analyses that suggest that Juche Self-Reliance or S?n'gun Military First Politics ideologies will inhibit any genuine attempt at economic reform in North Korea. We argue, in contrast, that ongoing changes to North Korean state and society mean that, a cyclical stop and start rhythm to the reforms notwithstanding, such attempts at economic reform are likely to continue. However, we also argue that while the contemporary reform drive resembles and may indeed reproduce some of the successes of the Chinese experience, North Korea faces significantly greater challenges, including the greater decline of North Korean industry, local resistance to reform, and the dangers of inflation. Furthermore, North Korea faces a highly challenging external security environment that undermines the ability of the regime to attract investment and by extension the political standing of reformist elements within the country. Given this contrast with the international environment surrounding China's own reform experience, our analysis emphasises the importance of geopolitical context in shaping experiences of economic reform and of development more broadly.     

Korean foreign direct investment in Europe: The determining forces

Korea's more complete integration into the world economy has been stunted by past government policies aimed at preserving comprehensive control over the domestic economy. This situation has recently changed owing to prevailing structural weaknesses in the Korean economy and the dictates of the global competitive environment. Consequently, the level of Korean overseas investment has escalated, particularly in Europe — the Triad region which has traditionally attracted limited inward FDI from Korea's large chaebol companies. This paper examines the determining forces that lie behind this trend. It is recognized that early Korean investments in the EU were principally driven by reactionary motives when confronted by actual or anticipated policy threats. While it is argued that the pretext for such investment has not significantly diminished, the imperatives of globalization together with emerging economic conditions in both east and west Europe have provided considerable incentives for more proactive FDI strategies to be adopted. The recent announcements by senior chaebol of intended large‐scale investments in Europe suggest that this new pattern is becoming increasingly apparent.     

Urban government and market reforms in China

Chinese reformers wish through their economic programme to create a new form of developmental state in China and a new relationship between state and economy. This paper examines these issues through a study of the impact of Chinese economic reforms on the structure and behaviour of local government, focusing on urban government at the district level. It looks at three aspects of the issue—the trend towards financial decentralization, institutional changes in district administration and changes in the relationship between local government and the urban economy. It concludes (contrary to arguments which regard bureaucratic response to the reforms as one of pure inertia and obstruction) that urban local government has changed in several major ways, the most obvious being a trend towards institutional expansion and proliferation. From the point of view of the reform process, some institutional changes have been positive, others negative, resulting in a ‘dualistic’ state which contains elements of both old and new forms of developmental state. There is a need for systematic analysis of the specific future needs and evolution of China's urban government which would guide a process of politico-administrative reform comparable to the current economic reform.     

The social order of Chinese capitalism: socio-economic uncertainty,communist party rule and economic development, 1990–2000

China's financially repressed economy remains characterized by a distinctly resilient political structure (the Chinese Communist Party, CCP) that penetrates both increasingly rational ‘private’ (market) and ‘public’ (state) organizations. How are we to understand the financial system's role in this persistently illiberal yet marketizing political economy? This paper develops a theory of China's financial reform as the management of socio-economic uncertainty by the CCP. Since the early 1990s, the financial system has formed a locus of the CCP's capacity both to manage and to propagate socio-economic uncertainty through the path of reform. The unique path of financial reform in China should thus not be viewed solely in terms of ‘partial’ or ‘failed’ free-market reform, but rather as the product of a more concerted vision of how the financial system enabled a mode of economic growth that combined the drive for accumulation of capital with the distinctive legacies of China's post-1989 socio-political circumstances.     

The political economy of education and skills in South Korea: democratisation,liberalisation and education reform in comparative perspective

The success story of Korean economic development is intimately linked with the so-called developmental state; and education policy, as part of centrally orchestrated industrial policy, played a critical role in the country's rapid industrialisation, which allowed for high employment rates, relatively modest social inequality and remarkable social mobility. However, the Korean success story has started to show ‘cracks’ – with labour market dualisation, rising inequality and ‘over-education’. While acknowledging the importance of the East Asian financial crisis as external shock for the Korean political economy, we suggest more fundamental problems in the socio-economic and socio-political underpinnings of the developmental state and its education and skills formation system for understanding how Korea's economic and education miracle turned into ‘education inflation’, skills mismatch and social polarisation.     

Crafting and dismantling the egalitarian social contract: the changing state-society relations in globalizing Korea

Abstract

Between the late 1960s and the early 1980s, the Korean developmental state implemented a series of drastic egalitarian educational policies that were primarily geared toward social integration. While promoting social mobility and educational expansion, they provided the basis of the egalitarian social contract in Korea's educational policymaking for decades. Since the 1990s, however, the Korean state has implemented neoliberal education reforms that led to the rapid dismantling of the egalitarian framework for the country's educational policymaking. These neoliberal reforms were strongly supported by the affluent middle class that prefer elitist education and can afford expensive private education. The general direction of change in Korea's educational policymaking suggests both significant change and continuity in the character of the Korean state and its relations to society since the 1990s. The contemporary Korean state still maintains a highly strategic and activist orientation in adopting and implementing policies although its policies are increasingly neoliberal in content. In doing so, the Korean state is gradually abandoning its broad social base and mobilizational capacity, while increasingly connecting with the upper segments of the middle class.     

Economic crises and augmenting financial bureaucratic power in South Korea

Despite negative public opinion, the role of the Korean government has expanded, while overcoming two rounds of global financial crises. The phenomenon of the re-swelling state is mainly attributed to the strengthening of the central bureaucracy, in particular the financial bureaucracy, rather than the whole central government or the state. The argument of the strengthening of the ‘state’ or the ‘government’ after economic crises might be subject to the error of generalization. Through the two rounds of economic crises, the financial bureaucracy succeeded in acquiring the authority of market supervision and industrial support. In consequence, the bureaucracy's institutional supremacy within the government grew less challenged. The central bureaucracy was no longer the loyal servant to the President. It has reinforced its institutional strength and autonomy vis-a-vis the President, the National Assembly, the Central Bank and civil society, under the pretext of building up the rational and autonomous market and democratic politics.     

Global citizenship as a national project: the evolution of segye shimin in South Korean public discourse

The idea of global citizenship in contemporary South Korean public discourse has revolved mainly around a national endeavor to boost the county's stature and competitiveness amid economic globalization. Based on a review of two decades of published media references to segye shimin (‘global citizen’ in the Korean language), this article shows that the specific usages of segye shimin – mainly by elites from government, academia, and journalism – underscore how the ‘developmental citizenship’ that marked South Korea's past authoritarian military regimes has carried on since the transition to civilian-led democracy. In contrast with the burgeoning academic discourse on cosmopolitanism that focuses heavily on moral responsibilities to humanity and the planet, South Korea's discourse of global citizenship has been closely aligned with neoliberalism and filled with exhortations to the domestic population to overcome numerous perceived liabilities seen as impeding the country's advancement. While global citizenship discourse in South Korea has emphasized top-down national strategic imperatives, a bottom-up approach to cosmopolitanism is also emerging as the country gains confidence and the notion of segye shimin gradually gains traction across the wider society.     

The Asian financial crisis and financial reforms in China

Abstract

Although China has avoided the direct attack of the Asian financial crisis, it has suffered secondary consequences leading to an economic slowdown. More importantly, the plight of its neighboring countries has driven home the urgency of financial reforms as China shares many of the problems at the root of the crisis in Thailand, Indonesia, Malaysia, and Korea. This article reviews the reform measures adopted by the Chinese government since the crisis. It analyzes the political dynamics of financial reforms in terms of state preferences and state capacities. In retrospect, the Asian financial crisis may well be seen as a turning point in reforming China's financial system.     

From developmental to regulatory state? Japan's new financial regulatory system

Abstract

Recent financial reforms in Japan and elsewhere in Asia represent, for various authors, a fundamental shift in financial governance and in state–business relations in the region. The old ‘developmental’ state in East Asia has supposedly made way for a neoliberal ‘regulatory’ state, with its emphases on agency independence and the non-discretionary enforcement of rules. I show in this paper that this interpretation exaggerates the extent of the transformation in the important case of Japan. Although the outward institutional forms of economic governance in Japan, as with many Asian developing countries, has changed dramatically since the mid-1990s, discretion still remains at the core of economic and financial policy. In the area of Japanese banking regulation and supervision, I show how this highly discretionary application and enforcement has been consistent with domestic political pressures. The result is a substantial divergence between superficial convergence upon international regulatory standards and underlying behaviour. I also give reasons why globalization does not mean that this hybrid regulatory model is unsustainable.     

The North Korean abduction issue: emotions,securitisation and the reconstruction of Japanese identity from ‘aggressor’ to ‘victim’ and from ‘pacifist’ to ‘normal’

Abstract

After Kim Jong-il's confession in 2002 that North Korean agents had abducted thirteen Japanese citizens in the 1970s and 1980s, North Korea has become the most detested country in Japan, and the normalisation of bilateral relations has been put on the back burner. The abduction issue has taken precedence in Japan even over North Korea's development of nuclear weapons and long-range missiles. It has also grossly overshadowed the atrocities for which Imperial Japan was responsible in the 20th century. Why has there been such strong emphasis on an issue that could be disregarded as comparatively ‘less important’? This article understands the ascendency of the abduction issue as the epitome of an identity shift under way in Japan – from the identity of a curiously ‘peaceful’ and inherently ‘abnormal’ state, to that of a more ‘normal’ one. The differentiation of North Korea as ‘abnormal’ emphasises Japan's own (claim to) ‘normality’. Indeed, by incarnating the perils of Japan's own ‘pacifist’ ‘abnormality’, which has been so central to the collective sense of Japanese ‘Self’ in the post-war period, the abduction issue has become a very emotional argument for Japan's ‘normalisation’ in security and defence terms. The transformation from ‘abnormal’ to ‘normal’ is further enabled by Japan trading places with North Korea in the discourse, so that Japan is defined as ‘victim’ (rather than former aggressor) and North Korea as ‘aggressor’ (rather than former victim). What is at stake here is the question whether Japan is ‘normalising’ or ‘remilitarising’, and the role of the abduction issue discourse in enabling such foreign and security policy change.     

International marriage and the state in South Korea: focusing on governmental policy

With globalization, the number of individuals traveling, working or studying abroad is rising globally, and so is the number of international marriages. However, there has been a dramatic rise in the number of ‘mail-order brides’ through matchmaking since the 1970s in the Western world and since the 1990s in several Asian countries. The so-called ‘mail-order bride’ phenomenon has become an important route for international migration, especially for gendered migration. Since official relations with China began in August 1992, the number of Korean Chinese women who came into Korea for marriage with native Korean men is about 100,000 between 1990 and 2005. The number of Japanese women who married Korean men is approximately 17,000, while the numbers of Filipino women who married Korean men is about 6000. Recently, the nationalities of these foreign wives of Korean men have expanded to include women from Vietnam, Russia, and Uzbekistan. In 2005, among a total of 250,000 foreign spouses in Korea, 160,000 of them were women. The Korean state had contributed to initiate these international marriages by importing Korean Chinese women for their unmarried rural citizens. As international marriages have become a social issue, the state tries to cope with these new issues through changing the laws and policies. Utilizing several government statistics, a nationwide questionnaire survey of nearly 1000 foreign brides with various nationalities, which was conducted in May and June 2005, and some interviewed data of foreign wives and government personnel, this paper analyzes (1) patterns and trends of marriage migration to Korea; (2) the issues and problems of foreign brides, such as their status and citizenship, economic situation, access to social security and ‘fake marriages’ issues; and (3) recent changes in governmental policies towards them. Special focus will be on what factors influenced the recent governmental action and how the ideology that ‘A married daughter is no longer a daughter ()’ is still reflected in recent policies even in today's more progressive society.     

Interests,passions and politics: business associations and the sovereignty dispute in Turkey

This paper examines business associations in a context where the state is being contested from below, focusing on Diyarbak?r, a major Kurdish city in Turkey. Against the backdrop of armed conflict, reform processes triggered by the country’s EU candidacy and socio-economic change, Diyarbak?r has become a contested zone over which the Turkish government and the Kurdish movement have been competing for control. Local business associations have also been implicated in such contestation. Considering the situation of dual power and moral economy at the local level, the paper examines how these associations deal with an adverse situation that is characterized by political instability and uncertainty. The analysis shows that business leaders have been able to make the ‘best’ of the situation.     

Governing the Chinese Economy: Regulatory Reform in the Service of the State

Pursuant to its extensive program of market reforms, China’s government tried to restructure itself to support a market‐dominated economy. Reform efforts have included elements that are familiar to scholars of public administration: streamlining government, strengthening bureaucratic capacity, distancing government from firms, and establishing independent regulators. But how deep have these reforms been, and with what ultimate goals? This article examines a crucial segment of the economy—China’s so‐called lifeline industries—to show how reforms to China’s economic governance system have been mapped onto an existing system characterized by extreme institutional fragmentation and an inability to imbue new governmental bodies with authority. Moreover, for these key industrial sectors, the Chinese party‐state’s strong interests in ownership, revenues, and social policy dictate that it use a variety of tools to protect these interests.     

Governed interdependence: Rethinking the government‐business relationship in East Asia

Analyses of East Asia's high‐performance economies have highlighted the advantages of a coordinated approach to market failures. With states dominating the process, both public and private agencies are increasingly involved. The recent literature sees public‐private cooperation as a limit to state capacity and thus a challenge to statism. Within an institutionalist framework, this paper proposes a fresh view of the government‐business relationship which avoids the statist premise of domination, but without relying on ‘weak state’ arguments. Through an examination of key organizational features of state and industry in Korea, Taiwan, and Japan, the paper proposes a theory of ‘governed interdependence’ in which both state and capital are taken seriously; where both strong state and strong industry go hand‐in‐hand; and where the capacities of both are mutually enhanced. The article identifies four principal types of government‐industry cooperation in the East Asian experience — some apparently ‘state‐led’, others apparently ‘business‐led’ — all of which can be accommodated by the theory.     

Japan and the Gulf crisis: Still searching for a role

Neither the major assumptions of developmental statist theories nor their revised arguments (e.g. network and internal organization theories) can persuasively elucidate the South Korean state's strong autonomy vis‐à‐vis the capitalist group in establishing and implementing economic/ industrial policies. A more relevant elucidation can be made by attending to the following three points: 1) one can more clearly show the former's autonomy in relation to the latter by examining discordant rather than amicable aspects of the relationship between them; 2) the strength of the East Asian state's autonomy lies not in its inherent, absolute cohesiveness but in its ‘political integrating power'; 3) in interpreting the state's strong autonomy vis‐à‐vis society, more research on political and administrative factors (rather than economic ones) need to be conducted. Also important are the behaviour of political and administrative agents who operate institutions and various interactions among them. To enforce these points, this article analyzes the political aspects of the state‐capital relationship while the South Korean government established anti‐chaebôl policies to restrict economic concentration via big businesses.     

Multilateral CBMs on the Korean Peninsula: Making a virtue out of necessity

Abstract

As its economy has become near to collapse, North Korea has tried to avoid direct contacts with South Korea because of the ‘absorption phobia’. Instead, the North has made continuous efforts to improve its relations only with the United States, seeking a guarantee for its survival. Given this circumstance, this paper argues that useful multilateral approaches such as KEDO and Four‐Party Talks will contribute to improving inter‐Korean relations. Thus, it would be sensible to explore every possible way (even through multilateral mechanisms) until both Koreas make a breakthrough for the deadlocked inter‐Korean CBMs. But the multilateral CBMs constitute a transitional and complementary role as South and North Korea should be primarily responsible for addressing major problems such as reunification. Among the multilateral approaches, the Four‐Party Talks will be a most useful mechanism which will enable the two Koreas to resume dialogue for the peace and reunification on the Korean Peninsula. In this peace process, more positive roles of major powers are also requested.     

Institutional Reforms and Democratization in Korea: the Case of the Kim Young Sam Administration, 1993–1998

This article examines the nature of political and institutional reform initiatives that have been carried out under former president Kim Young Sam. How effective have they been in consolidating democracy in Korea? Specifically, we examine why the Kim Young Sam government's political reform campaigns have been limited, and explore the impact of this limitation on his institutional reform initiatives and the process of consolidation of democracy in Korea. We argue that Kim Young Sam's initial political reform campaigns have contributed to creating a favorable environment for his institutional reform efforts. However, limitations of these initial political reform campaigns such as political funding and bribery scandals have hampered institutional reforms. We also argue that these difficulties were intensified by public dissatisfaction with Korea's poor economic performance and International Monetary Fund (IMF) financial assistance. As a result, Kim Young Sam's moral legitimacy as a civilian and reform-oriented leader toward the public has totally evaporated. Therefore, experiences under the Kim Young Sam administration are just trials and errors of democratization that show another failure in presidential leadership in Korea. These experiences will negatively affect the consolidation process of democracy in Korea by increasing the public's distrust of government as a whole. As a result, democratic consolidation in Korea is being delayed.