Political party and party system institutionalization in Southeast Asia: lessons for democratic consolidation in Indonesia,the Philippines and Thailand

Abstract

This article analyses the Kim Dae-jung government's industrial realignment (‘Big Deals’) policy in post-crisis Korea, which offers a valuable insight into the state's role in managing the transition from a developmental state to a free-market economy and into the changing nature of government–business relations. Although Kim was committed to creating a free-market economy in Korea, as the ‘Big Deals’ got under way critics accused him of violating market principles and employing tactics of intervention and coercion used by previous authoritarian regimes. The ‘Big Deals’ experience suggests a further stage in the evolution of the Korean developmental state; the dismantling of state powers and the implementation of neoliberal reforms in the 1990s had led to the emergence of a ‘transformative state’ in which the state acted as ‘senior partner’ rather than ‘commander-in-chief’. The transitional state charged with the task of rebuilding the economy after 1997 regained some of its lost powers and used some familiar methods of achieving its ends. However, it also demonstrated by the nature and scope of its interventions that it was gradually evolving and adapting to meet the changing economic environment. Although Kim's actions prompted allegations from the chaebol and their conservative allies of a return to autocratic economic management by the government, it was clear that the developmental state had not been resurrected. Rather, these criticisms serve to highlight the continuing antagonism in the state–business relationship; neither side had developed new strategies for dealing with each other and their relations were still characterized by mutual mistrust and staunch chaebol resistance to key reforms demanded by the government. Although suspicions of a permanent return to extensive state intervention were unfounded, they nevertheless diminished the prospects for the creation of a cooperative relationship between the state and big business that would be a crucial factor in revitalizing the Korean economy.