The Developmental State and its Decline in South Korea

(November 2022)

When discussing how the South Korean developmental state came to decline or whether it has declined, it is crucial to analyse the various pressures that the country faced, especially in the 1980s and 1990s. The success of Park Chung-hee’s administration in developing the economy also brought consequences that challenged the state’s role. Domestic and international pressures brought the country to a breakpoint that saw the collapse of its authoritarian regime.

Did the success of the developmental state lead to its own decline? Did high economic growth force the South Korean government to adapt? Throughout this essay, the various pressures that influenced change will be analysed. Therefore, was the high economic growth the inevitable factor in the decline of the South Korean developmental state?

It can be argued that the decline of the South Korean developmental state was due to the nature of the authoritarian state that ruled the country via its aggressively statist approach.

Before democratic elections in 1992, the nature of the South Korean developmental state was characterised by its interventionist and repressive policies that allowed the country to experience such high economic growth. The high economic growth and industrialisation came at the cost of a highly exploited working class, and a focus on the chaebol contributed to creating the animosity that the people felt towards both the government and the chaebol (Kim, 1993, p. 244). John Minns therefore argued that the decline of the developmental state was caused by the state’s inability to control the working-class movement that peaked in 1987 with major labour unrests and the announcement of democratic elections (Minns, 2001, pp. 1031-1032). The pressure from both the working class and the movement for democracy succeeded in 1987 (Minns, 2001, p. 1031). The transition to a democratic state led to socio-economic reform that can be argued caused the decline of the developmental state. The success of the developmental state undermined the basis of its power.

The democratic transition that followed the announcement of democratic elections in 1987 can also be viewed as part of the domestic pressure that led to the decline of the developmental state. Kim points out how the challenges of democratization led to the transition to a neoliberal economy (Kim, 1993, p. 244). This transition can be analysed to have begun through the election of Kim Young-Sam as his administration began to liberalise the economy via deregulation and a retreat on interventionist policy (Heo, et al., 2008). Following the 1997 financial crisis in South Korea, President Kim Dae-Jung pushed for further reform (Park, 2011).This particular administration contributed to the decline via the implementation of further labour and financial reform, or as Ian Pirie argues led to disintegration of the developmental state and a push towards a neoliberal economy (Pirie, 2008).

The breakdown of the authoritarian state in South Korea came as a consequence of domestic pressures. The dramatic breakdown in 1987 was directly caused by the democratization movement that escalated under the administration of Chun Doo-hwan (1980 – 1988) which came to an end when Roh Tae Woo announced the declaration of democracy in 1987 (Kim, 1993). Kim argues that democratization challenged the South Korean developmental state for two reasons. Firstly, economic restructuring saw the introduction of radical political reforms. As a consequence of the democratic order and for the state to renegotiate its role in the economy in a democracy, it became increasingly difficult as the state had to retreat from its interventionist policies as policy had to be negotiated. Furthermore, the state was obligated to listen and tolerate a variety of differing groups and demands. In South Korea, the two strongest groups with opposed views and differing needs were the Chaebol and Labour groups (Kim, 1993, p. 243). This presented challenges that pressured the government into appeasing both groups which contributed to the decline of the developmental state.

The particular group that was virtually uncontrollable in the 1980s were the family-controlled conglomerates known as the Chaebol. This particular group of economic elites began to challenge the state on economic policy. The state had lost its ability to control the chaebol due to their global expansion and intertwined networks with foreign corporations. A crucial part of their operations having been relocated outside of South Korea (Minns, 2001). The opening of South Korea to foreign investors also further weakened the states directive capabilities and this led to a gradual dismantling of obstacles against foreign investment. Furthermore, under Chun, Minns points out that a significant indication of the changing relationship between the state and the chaebol was the privatisation of banks and non-bank financial institutions. By 1983, all of the 5 major government owned commercial banks had been commercialised. By 1997, the government began pushing pro-chaebol policies following the financial crash (Park, 2011). The Chaebol contributed to the decline of the developmental state due to their growing influence on economic policy (Minns, 2001). The success of the developmental state had undermined itself by allowing the chaebol to grow so large.

South Korea experienced high economic growth between 1962 – 1979, Kim argues that alike many other East Asian developmental states, high economic growth forced the country to re-evaluate its raison d’être (Kim, 1993). In addition, in the 1980s, the South Korean economy began to experience problems both from domestic and international economic pressures. In this regard, international pressures that threatened South Korea’s high economic growth can be understood to have influenced the decline of the developmental state.

The nature of the global economy in the 1980s and 1990s forced South Korea to adapt. The Reagan administration pressured South Korea to open its markets to U.S. goods and financial institutions to redress the trade deficit between the countries (Kim, 1993). Additionally, the rise of competing states with China and the Philippines challenging the textile and electronic markets, along with working-class pressures on wages forced South Korea to adapt to ensure its competitive advantage (Minns, 2001). In an effort to ensure continued high economic growth, the state had to liberalise markets and change its industrial strategy (Minns, 2001, p. 1034). This can be interpreted as the decline of the developmental state caused by the high economic growth of the country. However, it is crucial to acknowledge that international pressure did play a role in the decline of the developmental state but as Minns argues, the majority was carried out by the South Koreans (Minns, 2001, p. 1038). Furthermore, it can also be argued that the change in economic and social policy i.e., the developmental state was due to South Korea’s high economic growth as the transition to democracy did not yield immediate economic growth (Heo, et al., 2008).

Conversely, according to Park, evidence suggests that the developmental state despite structural and market reform, remains intact and strong. The 1997 financial crisis can be argued as the final turning point that led to the decline of the developmental state through the structural and market reform that was introduced following the crisis, however this does not mean that it was disintegrated. Even if the introduction, control, and moderation of the financial, corporate, public, and labour sectors as well as multi-pronged industrial policies as a means to alleviate the domestic situation caused by the financial crisis seems to have only weakened the developmental state. Park argues that the developmental state persists through which the state has pushed the chaebols as the primary engines for the growth of the national economy and has also pushed labour friendly policies via pro-chaebol economic policies (Park, 2011, pp. 599 - 601). This is also evident in corporate reform in Kim Dae-Jung’s administration where weak chaebol companies were merged together to form stronger companies. Conversely, labour reform post 1997 introduced irregular workers who couldn’t join unions, this proves that the developmental state is still active to a degree as the state was still in control (Heo, et al., 2008). Although different to a strong interventionist policy, it is still part of the doctrine of the South Korean developmental state in which for the economy to develop, the chaebol must grow first.

Following the 1980s and 1997 financial crash, the developmental state has obviously been weakened to an extent, almost to extinction, despite evidence that it continues to exist. It can be argued that domestic and international pressure coincided in hampering the operations of the developmental state that led to its decline. Conversely, high economic growth still pressured South Korea to revise its raison d’être and did force the government to adapt in order to continue promoting growth. Therefore, ultimately the authoritarian nature of the developmental state did decline as that is evident with the transition to democracy, but this decline cannot be linked solely to high economic growth as domestic pressures such as the push for democracy by the people of South Korea all contributed to a change in the South Korean socio-economic state and the decline of the developmental state.

Bibliography

Heo, U., Jeon, H., Kim, H. & Kim, O., 2008. The Political Economy of South Korea: Economic Growth, Democratization, and Financial Crisis. Maryland Series in Contemporary Asian Studies, Issue 2, pp. 2-22.

Kim, E. M., 1993. Contradictions and Limits of a Developmental State: With Illustrations from the South Korean Case. Social Problems, 40(2), pp. 228-249.

Minns, J., 2001. Of miracles and models: The rise and decline of the developmental state in South Korea. Third World Quarterly, 22(6), pp. 1025-1043.

Park, Y. S., 2011. Revisiting the South Korean developmental state after the 1997 financial crisis. Australian Journal of International Affairs, 65(5), pp. 590-606.

Pirie, I., 2008. Disintegration of the development state and the failure of economic liberalisation in Korea. In: The Korean Developmental State: From dirigisme to neo-liberalism. Abingdon: Taylor & Francis, pp. 76-103.