9781137451231 01 pre colonial perspective 13 1.2.5 bringing the ‘second state’ perspective 15...

vii

Contents

List of Tables xi

Preface and Acknowledgements xii

Note on Romanization xvii

List of Acronyms and Abbreviations xviii

Part I Transition in Perspective

1 Perspectives, Arguments and the Structure 3 1.1 Introduction 3 1.2 Perceptions and perspectives on the Korean political

economy 8 1.2.1 Market perspective 9 1.2.2 ‘Statist’ and ‘World System’ perspective 9 1.2.2.1 Close cooperation between state and the

private sector 11 1.2.2.2 Governed markets 12 1.2.3 Cultural perspective 12 1.2.4 Colonial perspective 13 1.2.5 Bringing the ‘Second State’ perspective 15 1.3 Ideas and arguments in the book 17 1.4 Structure and organization 21

Part II Locating Twin Transitions

2 Situating Korea’s Political Economy under Twin Transitions 31 2.1 Korea’s first transition from agrarian to industrial era 32 2.1.1 Egalitarian political economy through

‘land reforms’ 33 2.1.2 Formation of the ‘political capitalist’ under

Rhee’s autocratic rule 34 2.1.3 ‘Developmental State’, Chaebol and Korea’s

industrialization drive 36 2.1.4 Korea’s ‘Cold War passage’ to a global market space 39 2.1.5 Developmental contradictions and paradoxes 41

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viii Contents

2.2 Korea’s second transition, from an industrial to a post-industrial era 42

2.2.1 From ‘developmental’ to ‘post-developmental state’ 43 2.2.2 Reforming the Chaebol system 45 2.2.3 Structural reforms in the financial system 46 2.2.4 Recasting of Korean capitalism 47 2.3 Conclusion 48

Part III First Transition: Agrarian Aristocracy and Its Discontents

3 Yangban-centered Agrarian Aristocracy and Its Social Discontents, 1700–1910 53

3.1 Late-Joseon era political economy 54 3.1.1 Inward orientation: Korea as the ‘Hermit Kingdom’ 57 3.1.2 Parasitical elite, the Yangban Class 59 3.2 Social response to foreign pressure 60 3.2.1 ‘Practical Learning’ 63 3.2.2 Donghak Peasant Revolution, 1860 65 3.2.2.1 Minjung, Donghak and the sources

of indigenous egalitarianism 67 3.2.3 Gabo Reform, 1894–6 68 3.3 Conclusion 70

4 Continuation of Status Quo under Colonial Economic Drain, 1910–45 71

4.1 The nature and structure of the Japanese colonial state in Korea 72

4.2 ‘Commerce–industry’ as a new source of national power 76 4.3 Consolidation of ‘large’ and the marginalization of ‘small’

farmers 77 4.4 Colonialism and the question of Korean identity 79 4.5 People’s struggle for national independence:

March First 1919 Movement 81 4.6 Colonialism and political–economic status quo in Korea 82 4.7 Conclusion 83

5 U.S. Intervention, War and the Assertion of the ‘Second State,’ 1945–60 85

5.1 Surrender, occupation and the formation of the Korean People’s Republic 86

5.2 Politics of people’s resentment and state repression 89 5.3 Inter-Korean War and the politics of reconstruction 92 5.4 Decimation of the Left, restoration of the Right 94

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Contents ix

5.5 Land reform as counter measure to Communism 97 5.6 U.S. aid, Rhee administration and the rise of the

rent-seeking capitalist class 102 5.7 April 1960 Revolution and the end of the Rhee regime 105 5.8 Shattering of the Yangban-dominated traditional order 107 5.9 Conclusion 108

Part IV Second Transition: Industrial Bourgeoisie and its Reconfiguration

6 Nurturing of National ‘Industrial Bourgeoisie’ under Authoritarian Polity, 1961–97 113

6.1 Rise of the capitalist ‘developmental state’ 115 6.2 Emergence of big business, ‘Chaebol phenomenon’ 122 6.3 Marginalization of ‘peasant dissent’ in the

high-growth phase 125 6.4 Growth-oriented economic bureaucracy 129 6.5 Regime of ‘repressed finance’ 132 6.6 Outward-oriented industrialization drive 134 6.6.1 Export promotion industrial strategy 134 6.6.2 Preferential tax system 135 6.6.3 Preferential credit system 135 6.6.4 Administrative support system 136 6.7 Historical weakness of ‘bourgeoisie impulse’ 140 6.8 Cold War era strategic constraints on the international

political economy 142 6.9 Hierarchy-conscious societal culture 143 6.9.1 Hierarchy, authority and power in Korea 144 6.9.2 Collective solidarity, societal discipline and

the rise of mass-production 144 6.9.3 Family at the core of societal culture 145 6.9.4 Education as social status 146 6.10 Conclusion 148

Part V Transformation and Turnaround

7 Financial Crisis, Democratic Consolidation and Civil Society Intervention, 1997–2007 151

7. 1 The political economy of Korea’s democratic consolidation 153

7.2 Financial crisis and the arrival of the ‘post-developmental state’ 155

7.2.1 Restructuring of the developmental state in Korea 157

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x Contents

7.2.2 Arrival of the ‘post-developmental state’ in Korea 158 7.2.3 From the ‘statist market’ to the ‘social market’ model 159 7.2.4 Contours of ‘DJnomics’ 159 7.3 Rationalization and restructuring of the corporate sector 160 7.3.1 Political economy of Chaebol reform 161 7.3.2 Promotion of SMEs in Korea 164 7.3.3 Venture capitalism, SMEs and start-ups 165 7.4 Deregulation of the Korean financial system 167 7.4.1 Transformation of the Korean financial system 168 7.5 Political economy of labor reforms in Korea 170 7.5.1 Labor repression and underdeveloped civil society 170 7.5.2 Marginalization of labor 172 7.5.3 Post-crisis flexible labor market 174 7.6 Rise of citizens’ movements: Paradigm shift in the nature

and direction of dissent 175 7.6.1 Civil society and its NGOs for political-economic

justice 177 7.7 Conclusion 180

8 Korea’s Post-Industrial Consolidation under Global Financial Uncertainty, 2008–14 182

8.1 Political economy of post-industrial consolidation in Korea 185

8.2 Developmentalist (neo)liberal state 188 8.3 Reconfiguring the Chaebol during neoliberal

restructuring 190 8.4 Foreign capital domination under liberal finance 192 8.5 Global financial crisis and its impact on Korea 194 8.6 Korea’s ‘developmental liberalism’ as a new model of

development 195 8.7 Capitalism, crisis and beyond 198 8.7.1 Global capitalism 198 8.7.2 Korean capitalism 200 8.8 Conclusion 201

9 Korean Political Economy in Retrospect 203

Notes 210

Bibliography 238

Index 261

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3

1.1 Introduction

A classic case of historical economic backwardness, the Korean penin-sula faced external subjugation and internal stagnation for most of the second millennium. Invasions by the Khitans (10th and 11th century), Mongols (1231–59), Manchus (1627–36) and Japanese (1592–98) made Korea (hereafter refers to Korea prior to division as well as to South Korea, or the Republic of Korea) seek refuge in the Chinese ‘tributary system.’ However, the nineteenth-century rise of industrialism in Europe and the relative decline in China’s power brought intense Western imperialist pressure on Korea to force open its ports for international trade and commerce. General Sherman incident in 1876, Korean-American War of 1871 and Japanese raids to Busan in 1876 created hostility between Koreans and foreigners. These bitter historical experiences with outside powers caused Korea to harbor deep-seated distrust toward foreigners, culminating in an explicit policy of self-isolation, earning it the designa-tion, ‘Hermit Kingdom.’ 1 The far-reaching external changes unfolding at the turn of the 20th century brought enormous pressure on Korea to adapt to new demands from the competing foreign interests. Unprepared to react effectively, Korea (under the Chinese tributary system, Sadae Chui ) showed unwillingness to adjust to the structurally changed situ-ation around the peninsula and, consequently, became the victim of colonialism, World War II and a subsequent painful national division. These pressures for Korea to change stimulated mass protests, sporadic rebellions and a sustained people’s resistance, finally culminating in what scholars have termed a ‘second state’ that effectively constrained the options of Korea’s ruling elite. In the 1950s, the sudden rise in public expectations due to egalitarian push emanating from North Korean

1 Perspectives, Arguments and the Structure

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4 The Political Economy of Korea

initiative to redistribute land led to aggressive posturing of societal forces in the South compelling the United States accepting comprehensive land reforms. The redistribution of land contributed to the creation of a vital ‘level playing field’ that effectively dismantled Korea’s centuries-old traditional Yangban-dominated socioeconomic system. 2 In a short span of time, the Yangban-centered traditional agrarian aristocracy gave way to the Chaebol -dominated modern industrial bourgeoisie. Surprisingly, a country considered by many as a developmental ‘basket case,’ began in the 1960s to demonstrate double-digit economic growth. 3

The creation of a new industrial bourgeoisie began under the authori-tarian rule (1961–79) of General Park Chung-Hee, whose single-minded pursuit of economic growth brought tangible results. Within a single generation, an industrial awakening – led by mass-production, spear-headed by family-owned large capitalist firm ‘Chaebol’, and guided by a powerful ‘developmental state’ – transformed Korea from a poor agrarian economy to a prosperous industrial giant. 4 Scholars talked about Korea’s remarkable transformation, using descriptions such as ‘Miracle on Han River,’ ‘Asia’s Next Giant’ and ‘Han Unbound,’ symbolizing the nation’s arrival on the international stage. 5 The sudden demise of the Soviet Union’s military threat and the consequent end of Cold-War-era politics embolden international political–economic forces to clearly articulate their interest in Korea.

In this starkly changed situation, the ‘Miracle on Han River’ under-went a crippling financial crisis in 1997. The literature examining this financial debacle highlighted external shock leading to macroeconomic imbalances that, according to many, created a ‘systemic crisis.’ 6 Korea responded to this crisis by initiating a widespread restructuring of state–society relations, involving reforms in such areas as state, society, finance and industry. With International Monetary Fund (IMF) conditionali-ties aimed at enforcing deregulation, and the nation’s political desire to reform demonstrated by the democratic leadership under President Kim Dae-Jung, Korea restructured its political economy with reasonable success, leading to a sharp economic recovery in the late 1990s, though with associated costs. 7

Korea’s high drama, with its remarkable post-Korean War economic miracle, then the sudden financial meltdown in 1997 and a quick rebound in 1999, has been credited to its distinct political economy, which effectively accomplished twin notable transitions in succession. First, in the post-Korean War period, the nation went through a massive transition from an agrarian to an industrial era. During this transition, Korea dismantled a centuries-old socioeconomic and political order

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Perspectives, Arguments and the Structure 5

based on the ‘suppression of productive forces’ by the parasitical aristo-cratic Yangban class. On the ruins of the Yangban system, Korea success-fully facilitated ‘promotion of productive forces’ led by the Chaebol and its mass-producing industrial system. Second, in the post-1997 finan-cial crisis phase, Korea was successful in making the transition from the industrial to the post-industrial era by reforming and restructuring the industrial bourgeoisie, led by the Chaebol, and its creator, the interven-tionist ‘developmental state.’

In order to accommodate these twin transitions, Korea twice needed to transform the very core of its political economy by constricting the dark side of its own agrarian aristocracy and industrial bourgeoisie: the first time by instituting comprehensive land reforms to effectively demolish a highly privileged agrarian aristocracy, and the second time by reforming and restructuring Korea’s family-owned large business conglomerates into professionally managed, core-competent firms. In both instances, ‘external variables’ were carefully used as catalysts to promote the indigenous demand for political–economic change. During the first transition, it was the U.S. Occupation Administration that imple-mented land-reform measures; however, pressure to reform landhold-ings in Korea was mobilized by the common people through a powerful grassroots movement led by increasingly popular left-leaning ‘people’s committees.’ 8 Similarly, in the second transition it was IMF-dictated conditionalities for signing the $57 billion ‘rescue package’ that made Korea go through a painful process of reform and restructuring. However, demand for recasting the Korean developmental paradigm, largely tilted towards the highly diversified Chaebol, was articulated by the political forces of democratic consolidation, civil society and its institutions such as non-governmental organizations (NGOs), progressive scholars, a vibrant student community and highly mobilized labor force. 9

Korea’s success in both transitions rests primarily on the sacrifice rendered by numerous protests, reform and resistance movements seeking an equitable political economy. The crucial impact of these social movements enabled Korea to substantially broaden the social base of its economic activities. The arrival of a socially embedded economic organ-ization provided dynamism to Korean economy. The quick rebound after the 1997 financial meltdown was due to this enlarged social base of the Korean economy being adequately represented by mass-produc-tion industries employing abundant labor. This enlarged social base enabled Korea to, on the one hand, compete in the high-tech sectors with advanced industrialized economies such as the United States, Japan and Germany, and on the other, Korea retained competitiveness

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with low-tech mass-production vis-à-vis the developing labor-surplus economies of China, Southeast Asia and so forth. Indeed, Korea has been among the few countries that successfully moved beyond the challenges imposed by persistent agrarian underdevelopment and low value-added mass-production. Confronting various odds in the process of transition, Korea successfully rebalanced mass-production with high-tech manufacturing coupled with emerging knowledge-intensive service industries. Korea worked hard to enhance the economics of ‘soft power’ by promoting the cultural industry, symbolized in the ongoing Hallyu or Korean cultural wave. There seems to be a consensus emerging among scholars that Korea has been able to revitalize and transform its political economy and in the process secure it’s rightful place in the evolving ‘post-industrial society.’

These twin transitions – agrarian to industrial and industrial to post-industrial – have acquired more credibility given Korea’s historically ‘compromised autonomy’ suppressed under overpowering pressure from foreign powers such as China, Japan and the United States. During the centuries of Chinese supremacy over the Korean peninsula, Yi-Joseon state in Korea, which appeared to control a powerful, centrally organ-ized bureaucracy, was a relatively weak and penetrated state. It was the Yangban aristocracy, not the Korean king who dominated the central state bureaucracy. State operated only as a revenue-raising institution for the elite, rather than as a source of power for the king. 10 Landlords had real ownership, and the king was only responsible for revenue collec-tion, not its management, which made both sides contend over the collected surplus; however, neither side had a clear interest in pursuing greater wealth through investment and innovation. 11 The Yangban aris-tocracy exercised an extraordinary degree of influence over state and society. Under the weak state system, this aristocracy had overpow-ering influence over state and society. Unlike Japan, which initiated the dismantling of feudalism by the comprehensive Meiji Reforms in 1868, the Korean state remained influenced by a neo-Confucian governing ideology and its potent instrument – the scholar-official class – which created an ‘agrarian trap’ of poverty, underproductivity and a lack of entrepreneurial initiatives. Operating under the shadow of Chinese hegemony, Joseon state compromised its policy autonomy and was unable to break away from the bureaucratic-aristocratic structures to jump-start economic modernization.

At the turn of 20th century, the relative decline of China and the remarkable rise of Japan turned Korea into a venue for a power contest between these rival foreigners. Industrialized and militarized Japan

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finally annexed the Korean peninsula in 1910. During the brief but harsh Japanese colonial rule, the Korean state system was overwhelmed by imperial policies aimed at assimilating Korea into the imaginary world of ‘Greater Japan.’ However, the arrival of colonial rule did not result in a fundamental realignment of political–economic forces; rather, impe-rial interests found convergence with Korea’s old political economy, centered on the aristocratic Yangban class.

The sudden end of World War II and consequent surrender of the Japanese military paved the way for the arrival of new hegemonic powers in the Korean peninsula – the United States and the Union of Soviet Socialist Republics (USSR) – which sparked a dangerous ideological confrontation. Both powers hurriedly acted to defend their ideological commitments. The USSR, along with critical support from the People’s Republic of China (PRC), actively promoted a people’s movement that was highly concentrated in the northern part of the peninsula (currently North Korea, which hereafter refers to the Democratic People’s Republic of Korea) and initiated comprehensive, far-reaching land reforms, whereas the United States quickly acted to safeguard the interests of the agrarian aristocracy in the Southern part of the peninsula. But the centuries-old wish of the Korean people to own a piece of land created internal clamoring in the form of a people’s movement for land reform. Having a clear understanding of the rising global challenge posed by expansionist communist ideology, the United States decided to provide unequivocal support to initiate land reform as a ‘counter-measure’ to combat the egalitarian appeal of Communism. A pan-Korean left move-ment mobilized common people to demand nothing less than thorough land reform and a political economy based on economic justice. Here, it is important to give due credit to the United States which, despite its hegemonic reach in the peninsula, accepted land reform to deter the Korean people from falling into Communism. Again, in the late 1990s, when Korea’s industrial bourgeoisie became too dominant and started to monopolize the system to serve its own narrow self-interests, the United States through the International Monetary Fund (IMF) articu-lated a restructuring of Korea’s industrial conglomerates. However, U.S. support for recasting the Korean Chaebol came to promote the interests of international capital, not the interests of the crisis-ridden Korean industries. Sensing the popular wish to reorganize the concentration of wealth, the government in Korea acted swiftly to restructure Chaebols by forcing them to concentrate on their core businesses, with more balanced debt–equity ratios, and discouraged owner’s families from relinquishing managerial controls over their businesses.

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In sum, both transitions mark points of departure in the Korean polit-ical–economic order. It was the assertion of social forces that helped Korea to build ‘incremental pressure’ that finally led to ‘punctuating the equilibrium’ 12 (disrupting the equilibrium) and twice transforming the agrarian and industrial systems: the first time it was the grassroots left movement, which mobilized public opinion against the Yangban-centered agrarian aristocracy, and in the second instance it was civil society and its NGOs, students, labor and progressive polity that agitated against the Chaebol-dominated industrial bourgeoisie. These twin transi-tions clearly widened the social base of the Korean economy by empow-ering marginalized sections in the society. Indeed, Korea’s long history of social mobilization through various grassroots people’s movements, and later a civil-society-led ‘citizens’ movement,’ provided impetus to fundamental socioeconomic and political change; nevertheless, in both instances foreign agency was carefully used to pull through a painful structural reordering of the system.

1.2 Perceptions and perspectives on the Korean political economy

This book aims to interpret and explain the political–economic process of Korea’s tumultuous journey from ‘agrarian to industrial’ and ‘indus-trial to the post-industrial’ era. By taking into account the prevailing arguments embedded in the ‘market,’ ‘state,’ ‘world system,’ ‘culture’ and ‘colonial’ perspectives articulated in explaining the changing dynamics of Korea’s political economy, this study intends to broaden the conceptual horizon of analysis by collecting the fragmented threads of Korea’s social logic as expressed in untold struggles, sufferings and sacrifices made by unknown Koreans. The due consideration accorded to societal forces and discontent in shaping the nature and direction of Korea’s political economy forms the basis of an alternate ‘second-state’ perspective. The twin disjunctions created by land reforms in the early 1950s and Chaebol reform in the late 1990s unleashed enough pressure to punctuate the long-held ‘agrarian equilibrium’ dominated by the Yangban aristocracy and a short-lived ‘industrial bourgeoisie’ monopolized by handful of Chaebol groups, but the story of ‘incre-mental changes’ brought about by numerous resentments, protests, and rebellions leading to these two major disjunctions is equally fascinating and crucial in providing a comprehensive account of transitions and transformations that changed the course of history for this peninsular nation. The process of transition and transformation in Korea is spread

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over a long period of policy experimentations; however, the focus of the present study revolves around these twin disjunctions and the forces leading to these path-breaking changes.

1.2.1 Market perspective

The increasing domination of neo-classical economics in the 1980s was clearly visible in the analytical rigor aimed at explaining the rise of the Korean and other East Asian economies. The key argument proposed by the advocates of the market perspective in explaining rapid economic growth in Korea stressed market-determined state intervention and placed categorical emphasis on export-oriented industrialization. The IMF, World Bank and other prominent providers of international devel-opmental aid discussed at length the merits of the market. Scholars such as Balassa (1977), Corbo et al. (1985), Hughes et al. (1988), Krueger (1978, 1990), Lal (1983), Little et al. (1970), and Michaely et al. (1987) highlighted the failure of state intervention and argued for the market playing a key role in augmenting the process of economic growth in the region. Many of these studies analyzed the causes behind the East Asian economic transformation, including Korea’s, and concluded that market-based intermediation played a positive role in making econo-mies grow faster.

It seems that this analysis of East Asian growth – an analysis based on a neo-classical framework – largely glossed over the rise of a highly interventionist ‘developmental state.’ A slight course correction in anal-ysis came in by an influential World Bank study (1993) that margin-ally deviated from the overriding market fundamentalism and stressed ‘market-friendly’ or ‘market-conforming’ factors such as allowing greater competition through export orientation, total-factor productivity, giving a high priority to improving educational levels, the promotion of science and technology and, hence, greater economic growth. It has been pointed out that the spread of knowledge and substantial improve-ment in technological levels in Korea were possible due to multiple factors, such as a freer flow of labor, capital and technology. For the first time, the World Bank accepted the bigger role played by the state in the promotion of knowledge and technology, which positively contributed to Korea’s economic dynamism.

1.2.2 ‘Statist’ and ‘World System’ perspective

Some doubts started to appear regarding the singular dominance of ‘market perspective’ as Japan’s graduation to financial superpower status prompted a wide-ranging debate in an attempt to decipher the real forces

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and causes at work propelling Japan’s industrial might: specifically, debate concentrated on the use of a ‘selective’ or ‘strategic’ industrial policy. A neo-Weberian ‘theory of the developmental state’ and the ‘world system theory’ (Johnson, 1982; Amsden, 1989; Deyo, 1987; Evans, 1995; Frank, 1998; Arrighi et al., 2003; Wallerstein, 2005) filled the void created by the market perspective, which largely failed to unravel contents of ‘strategic’ industrial policy. In addition, while for the most part rejecting depend-ency theory as inadequate in explaining East Asian development (Barrett and Whyte, 1982; Barrett and Chin, 1987), scholars have cited ‘East Asian regional economic integration’ as crucial to the region’s economic success in the framework of a more refined version of the ‘world systems’ explanation (Woo, 1991: 20; Cumings, 1984 ; So and Chiu, 1995). 13

The evolution and development of the ‘statist perspective’ goes back to the 1940s and 1950s, when Keynesian economics argued for a powerful state capable of managing the aggregates of demand and supply. Several strategies, such as ‘balanced growth’ (Lewis, 1955; Nurkse, 1953; Rosenstein-Rodan, 1943), ‘unbalance growth’ (Hirschman, 1958), ‘economies of scale’ and ‘infant industry logic,’ 14 pointed out certain market imperfections and justified state intervention as crucial for struc-tural changes needed to propel sustained economic growth in the long run. Other models suggested that since many developing countries are only primary goods producers, and their prices relative to industrial goods would fall permanently, leading to a situation known as ‘export pessimism’ (Prebisch, 1950). By combining both ‘infant industry’ and ‘export pessimism’ logics, scholars argue that structural change in these countries’ production systems is a prerequisite to achieving long-run positive economic growth. Here, the state needs to play an important role, as structural changes could not be realized through the market mechanism.

Since the mid-1980s, many economists referred to as structural or heterodox, revisionist or new interventionists were categorical in their criticism of market perspective (Akyhz and Gore, 1994; Amsden and Singh, 1994; Rodrik, 1994; Singh, 1995; Matsuyama, 1991; Murphy et al., 1989; Rodrik, 1996; Amsden, 1989, 1992; Auty, 1991; Hikino and Amsden, 1996; Wade, 1990; Woo, 1991). These economists argued that an interventionist state played a crucial role in the process of economic growth. Johnson’s research (1982) became a landmark study in the neo-Weberian literature on the state, anchoring much of the debate about the role of the state in an empirical body of work that focused on East Asia as opposed to ‘world systems’ and ‘dependency theories,’ which were mostly based on Latin America.

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Amsden (1989), in her seminal work, presented an interventionist interpretation of Korea’s economic development and argued that state intervention in the economy played a determining role in bringing about positive outcomes. It has been argued how the Korean government was able to reduce coordination problems by organizing regular ‘Monthly Meetings’ involving government, business and banks in a continuous dialogue. These meetings resulted in reducing the transaction costs often to lower levels than the market-determined prices. By recognizing fast growth in Korea as a function of existing (Western) technologies, Amsden (1989) accorded the central position to the process of learning, adopting and internalizing existing technologies. Improving the level of learning makes the role of the state rather crucial. The key role played by the Korean state in providing mass education that helped labor to adjust with the changing times was commendable.

The developmental priorities of the Korean state were reflected in the practice of ‘state-guided’ or ‘strategic’ industrial policy. The state’s developmental priorities evolved over this period of time. Initially, in the 1960s, the Korean state provided enormous support – financial and administrative as well as moral – to the export-oriented enterprises in the mass-production sector such as textiles, leather garments, light engi-neering goods and so forth. In the 1970s, with a deteriorating security situation on the peninsula and the growing ‘fear of abandonment’ by the United States, the state in Korea leaned towards a ‘self-help mode’ by launching an ambitious heavy and chemical industries (HCI) project. With the advent of 1980s, the focus shifted towards high-tech ‘sunrise industries’ such as semiconductors, automobiles, shipbuilding and so forth. Due to a long gestation period in the development of HCI, the role of the Korean state became crucial (Amsden and Singh, 1994; Auty, 1991; Singh, 1994; Wade, 1991). This developmental context provided legitimate reasons for the government’s activist industrial policy (Chang, 1993). There is no doubt that ‘statist’ and ‘world system’ perspectives have explained East Asia’s industrial transformation in a manner quite distinct from how Western developmental experiences have analyzed them. Yet, statist and world-system theoretical explanations follow a narrow path of political economy, leaving a ‘number of issues underap-preciated or unspecified, impeding a more balanced view of East Asian development’ (Gi-Wook Shin, 1998: 1310).

1.2.2.1 Close cooperation between state and the private sector

A large body of literature on state and business relations in Korea suggests that the core of its ‘developmental alliance’ was based on the close

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cooperation between the state and family-owned business conglomer-ates (Cho and Hellmann, 1993; Choi, 1987; Jones and Sa kong, 1980; Chung H. Lee, 1992; Lee and Naya, 1988; Wade, 1990). The two distinct institutional structures – ‘Deliberation Councils’ and ‘Monthly Export Meetings’ – where representatives from the state, business and banks worked together to cement state and big-business relations, played a key role in managing the cooperative alliance. Due to this close proximity with business, government devoted energy for specific details and gave full attention towards monitoring the performance of export industries. The state in Korea was able to meet industry’s expectation by a timely adjustment of export incentives and other support systems. Similarly, industry through its remarkable export performance lived through the state’s pursuit of developmental objectives.

1.2.2.2 Governed markets

The hypothesis of ‘governed markets’ refers to a distinct model followed by many East Asian countries where business competed and cooper-ated under the supervision of the government (Wade, 1990). This administered market place, in the case of Korea, characterize the rela-tions between government and the private sector as a ‘quasi internal organization’ (Cho and Hellmann, 1993; Haggard and Lee, 1995; Chung H. Lee, 1992), referring to Williamson’s ‘internal organization model’ (1975). 15 Here, the firm has been understood as an organization that lowers transaction costs by internalizing certain activities. Through informal contacts between government, bank and industry, there can be a growth of the internal market, which can lower transaction costs through internal coordination. These state–business coordinated trans-action costs can be significantly lower than a market-mediated price.

1.2.3 Cultural perspective

Confucian culture has been considered as key to East Asian success in achieving economic development. 16 During the period of the 1980s–90s, a number of Korean scholars (Lee-Jay Cho, 1994; Sang-Seek Park, 1995; Yoon-Hyung Kim, 1994; Ho-Keun Song, 2003; Bon-Ho Koo, 1995; Nam, 1994) articulated a cultural perspective that places emphasis on Korea’s Confucian culture and its basic attributes such as authority, hierarchy, and discipline as key determinants to economic development. 17 In order to ascertain relations between Confucian culture and economic develop-ment, there are three distinct views in circulation: first, that Confucianism is an obstacle to economic development. The failure of China and Korea to develop capitalism in the 19th and early 20th centuries serves as

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credible evidence. Sociologist Max Weber has supported this view; second, that Confucianism positively contributes to economic growth as the successful economies of Japan, Korea and China in the post-World War II era support this assertion; and, third, that Confucianism has no effect at all on economic development, as success and failure of any government policy depends on the willingness of the people to accept or reject it. So, if culture is defined as “a shared set of codes of behavior or a world view common in its basic principles,” 18 there is a need for social pressure to conform to such codes or principles. According to Kingsbury (2001), soci-eties cannot function properly unless there is certain level of conformity. Therefore, East Asian economic success must have found a positive response to policies, or at least they were not resisted by the people.

1.2.4 Colonial perspective

Defying the prevailing common understanding dominated by nation-alist scholarship that colonialism has been used as a tool for exercising hegemony and control, the ‘other perspective’ acknowledges colonial administration’s developmental role in the colonies. It gives credit to many colonial administrations in bringing colonial investment, trade and technical know-how, and thus accepts their contribution in the colo-nies’ economic development. Taking a cue from this newfound wisdom, an argument was posited that Korea’s post-war economic growth has its roots in the colonial industrialization of the 1930s, when mobiliza-tion of troops for Japan’s imperial mission provided great impetus to the development of railways, roads, ports and other infrastructural indus-tries. 19 The colonial roots to Korea’s economic transformation were high-lighted by Kohli (1994), who argued how Japanese colonial rule created certain initial conditions for economic growth in post-colonial Korea, conditions which were just waiting to be tapped. Indeed, colonial rule in Korea was highly oppressive and exploitative; whatever the Japanese created in Korea was to fulfill their colonial ambitions, but it somehow built up an infrastructure for rapid economic growth in later period, growth which would have difficult, or say, required a longer period to be achieved in the absence of Japanese colonial rule.

In fact, soon after gaining independence from Japan in 1945, Korea plunged into other severe crises without parallel in any other state in the world, starting from ideological differences in the country, the outbreak of the inter-Korean War (1950–3), and the authoritarian and corrupt rule of Syungman Rhee. The 15 years of interlude since the end of Japanese colonial rule was broken in 1961 by a military regime under Park Chung-Hee. In the early years of his career Park Chung-Hee

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was trained in the Japanese military academy in Manchuria and was a ‘Japanophile.’ He had deeply internalized the values inculcated by the Japanese. Though a staunch nationalist, Park Chung-Hee went ahead with shaping the core features of the Korean economy. Closely emulating the Japanese developmental model, the Park administration switched over to export-oriented industrialization to replace import-substitution industrialization as followed by earlier regimes. This economic regime change gave a boost to the Korean developmental paradigm.

Indeed, the colonial administration was able, overnight, to demolish what institutions of Korean dynastic rulers had built over a millennium. Similarly, what Korean dynasties failed to accomplish in centuries, such as abolition of slavery and codification of law, the highly centralized, top-down Japanese colonial state did it with one stroke. The colonial administration was also credited with building infrastructure in the fields of surface transport, commerce and finance (Amsden, 1989). Although Japanese colonial rule was authoritarian and oppressive, it also pulled Korea from its long isolation and passiveness and introduced certain modern features to its deteriorating political and economic life. These modern utilities and structures were actively used first by the U.S. mili-tary administration and later by Korea’s developmental state.

The lineage of Korea’s development to its colonial past had been fiercely refuted by the Korean nationalist scholars who clearly pointed out the contradictory and exploitative nature of colonial modernity. Nationalist scholarship on colonial development can be divided into two distinct schools of thought: one, the ‘sprout school,’ and the other being those who deny both the ‘sprout’ thesis and the colonial origin of capitalist development in Korea. The sprout ( maenga ) school firmly believes that the first seeds of capitalism were evident in the late-Jeoson period and they had sprouted and could have grown in full if there had been no outside interruption. It provides evidence of growing commer-cialization of Korean agriculture in the 17th and 18th centuries as proof revealing the building up of a capitalist impulse. The nationalist school of thought also holds colonialism responsible for the destruction of the nascent, budding process of capitalist development in Korea.

Nonetheless, some in nationalist scholarship are also critical to the idea of the sprout school. Cho Kijun (1973) rejects the idea of ‘sprout theory’ as well as any positive impact of colonial rule as he sees the rise of capitalism in Korea only after liberation from colonial rule. He indi-cates that colonialism produced a dual economy that heavily depended on the Japanese economy in terms of capital and technology, so the sudden withdrawal of Japan disrupted the production system in Korea. 20

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Furthermore, national division and war caused the disintegration of Korea’s industrial system and its productive apparatus. Consequently, due to the unfavorable colonial legacy, Korea had to begin afresh after independence. Moreover, unlike Japan where the private sector had controlling stake in the nation’s banking system, Korea’s rapid indus-trialization in the 1960s was financed by a state-controlled banking system.

1.2.5 Bringing the ‘Second State’ perspective

The rich body of scholarship used market, state and world system, cultural and colonial perspectives to explain Korea’s spectacular economic transformation in the post-independence period. However, the above perspectives were not able to take into account the signif-icance of the ‘second state’ under which social forces mobilized incremental pressure on the nation’s political–economic choices. At first, these forces mobilized under the banner of a radical ‘people’s movement’ demanding structural change, which culminated in the comprehensive land reforms of the 1950s, and then were led by civil society and its ‘citizens’ movement,’ seeking changes within the capi-talist system, and in the late-1990s particularly demanding legisla-tion aimed at reforming industrial conglomerates. In this perspective, state power is linked to its embeddedness in society (Evans, 1995; Weiss and Hobson, 1995; Weiss, 1998). Learning from the ‘second state debate’ and its core argument – mutual embeddedness of state and society – one can clearly see how the autonomy of the Korean state was constrained by the assertive social forces actively involved in direct actions of resentment and rebellions. These social forces actively sought economic justice based on an egalitarian political economy. In the name of state autonomy, Korea once created the Yangban-dominated agrarian aristocracy, and then the Chaebol-dominated industrial bourgeoisie; however, in both periods society at large was kept on the margins. In various instances, the challenge to state autonomy in Korea came from social forces and their discon-tent, which was expressed in various social mobilization campaigns demanding socio-economic equality based on their long-cherished idea of Minjung as well as more recent civil society-led ‘citizen movements’.

This societal discontent, struggle and its demands worked as crucial incremental pressure which compelled the Korean state and its protector – a new hegemonic power, the United States – to adopt and implement a comprehensive land-reform program that finally

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demolished the centuries-old agrarian aristocracy. Similarly, it was indigenous civil society pressure mounted by powerful NGOs that changed the nature of the Korean state, which swiftly agreed to the restructuring of its Chaebol-led industrial bourgeoisie. IMF condi-tions and U.S. pressure only made sure that Chaebol reform went with all the details and was not only limited to cosmetic changes. In the framework of the ‘second state,’ the assertion of social forces brought mutual embeddedness of state and society at the fore, leading to cooperative state–society relations that worked as effective constraints on the state’s autonomy. This societal push brought the aspirations of the common people to center stage, which provided incremental pressure leading to twice punctuating the equilibrium – once breaking the strangle-hold of agrarian aristocracy, and a second time recasting family-owned large industrial conglomerates.

This book gives due consideration to the numerous societal demands expressed in the form of resentment led by common people, students and other civil society elements that shaped the Korean political economy. By articulating a perspective based on the ‘second state,’ attempts have been made to expand the boundaries of analysis focusing on the Korean political economy. Based on recent findings regarding the involvement of people in seeking political–economic adjustments, this study throws new light on the crucial incremental pressure mounted by people’s move-ments as well as by citizens’ movements, which finally contributed to twice punctuating the political–economic equilibrium. It highlights that the basic push for fundamental change in the Korean political economy came from grassroots mobilization, an active student body, progressive intellectuals and an empowered civil society that maintained a strict vigil on the nation’s political–economic structures, institutions and actors. A number of people’s movements, protests and rebellions in Korea fought vigorously to expand the social basis of the nation’s economic organiza-tion. In the wake of independence from Japan, ‘people’s committees’ 21 popped up all over Korea, demanding an egalitarian political economy based on the redistribution of land to poor peasants. Similarly, in the aftermath of the financial crisis in 1997, a civil society movement led by the powerful NGO sector criticized ‘crony capitalism’ and demanded economic democracy and reasonable limits to the wealth concentra-tion under a few chosen Chaebol groups. 22 In both instances, crucial efforts by common people were aimed at widening the social basis of Korean capitalism. This book makes an effort to establish the autonomy of society to shape state power, not the autonomy of the state to shape society’s power.

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1.3 Ideas and arguments in the book

The main arguments explaining change in the Korean political economy derive their logical insights from the ‘punctuated equilibrium’ theory. Initially developed as biological theory, ‘punctuated equilibrium’ has been used extensively to explain nature and quantum of change in social sciences as well (Gersick, 1991; Gould and Eldredge, 2001). 23 It emphasizes the building-up of incremental pressures, over a period of time, that can slowly tilt the balance against the forces of status quo. In the case of Korea, forces of a centuries-old political–economic status quo were firmly tied to the Yangban aristocracy that controlled the flow of knowledge, the disposition of government jobs, and large tracts of land in the countryside. Operating from a position of privilege, this orthodox social class provided stability – even to the level of stagna-tion – during more than half a millennium of rule by the Yi-Joseon Dynasty. Arguments suggest that incremental pressure to change the Korean political economy was initiated by the ‘second state,’ where social forces imposed constraint on the state’s autonomy. The social forces in Korea were mobilized by individual courage and collective sacrifice by the common people. Beginning with Minjung conscious-ness that provided energy to a community of dissent expressed in various reform movements – such as the Tonghak movement (1860), Gobo Reforms (1894–96), Samil Movement (1919) and the Jeju (April 1948) and Yeosu-Suncheon (October 1948) rebellions, student revolu-tion (1960), the Gwangju uprising (1980), and post-crisis (1997) citi-zens’ movement – Korean history is dotted with the people’s struggle to demand structural changes in the nation’s political economy. Possibly, these incremental pressures were not enough to punctuate equilib-rium maintained by the powerful agrarian as well as industrial inter-ests in Korea. The staying power of these entrenched interest groups was simply phenomenal as even Japanese colonial rule representing industrial–entrepreneurial forces sided with the local agrarian aristoc-racy. Similarly, after a decade-long structural reordering in the post-1997 financial crisis phase, Chaebol power in Korea is once again on the rise. Nonetheless, adding up to these incremental pressures, Korea found vital support for change from a foreign agency that was eager to push land reforms, though as a counter measure to the growing leftist tendencies on the peninsula. The U.S. Occupation Administration in Korea was this foreign agency, and it sensed the burning desire of the Korean peasantry for land reforms aimed at correcting a political–eco-nomic order dominated by the tiny Yangban class. Korea’s National

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Assembly passed land-distribution laws in 1949. Incremental pressures built up by the struggle waged by people’s movements, along with a massive push from the U.S. Occupation Administration resulted in the punctuation of the age-old equilibrium maintained by the small, but privileged, Yangban class.

The dismantling of the Yangban system, the retreat of Japanese busi-nesses from the peninsula and the nationalist fervor brought about by much-awaited independence – these all threw Korea’s state–society rela-tions into flux. The near total destruction of the Korean aristocracy through comprehensive land reform necessitated that Korea inch towards achieving a consensus to create its own industrial class. In the absence of any powerful interest group in the post-colonial phase, it was easier for an independent state to reset state–society relations and build Korea’s industrial class. During the First Republic, President Rhee created ‘political capitalists’ who actively vied for state support to win lucrative contracts coming out of U.S. aid to reconstruct the Korean War-ruined economy. The beneficiaries of land reforms expected an upward movements in living standards, but the rent-seeking circulation economy was unable to meet people’s aspirations. This led to widespread dissatisfaction among Korea’s young and restless popu-lation. In April 1960, a student revolution swept over the corrupt edifice of Korea’s First Republic. 24 After a brief interregnum, Korea witnessed the advent of military dictatorship under General Park Chung-Hee. Having first-hand exposure to Japanese industrialization efforts during the colo-nial period, Park Chung-Hee had his administration give top priority to building a truly national–industrial bourgeoisie. 25 Massive state subsidies and various administrative support structures created powerful momentum toward industrialization as the nexus between state and the big business produced decades-long double-digit economic expansion. Korea witnessed the profound transformation of its poor agrarian economy, which within a generation became a prosperous industrial economy. This led the nation to a new political–economic equilibrium carefully constructed and main-tained by a ‘developmental alliance’ based on close cooperation between state and big business. In this new equilibrium, the Chaebol groups exclu-sively dominated the industrial sphere, and SMEs and labor had to accept marginal positions. The paradoxes and contradictions in the state-con-glomerate dominated political economy have been regularly highlighted by various scholars and trade union leaders as well as ‘progressive’ political ideologues. 26 This critique provided crucial incremental pressure on the capitalist system that functioned with only a very narrow social base.

The undisputed leadership of the Chaebol, who were once credited with bringing industrial transformation in Korea, suddenly confronted

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a crisis of survival in the 1997 financial upheaval and came under attack from all sides, from policy makers to common people. Many scholars termed the Korean developmental pattern ‘crony capitalism’ where the powerful state promotes its few Chaebol cronies. These industrial conglomerates enjoyed state support and subsidies, though only after demonstrating satisfactory performance in the export market. ‘Organized from the top,’ Korean capitalism created an octopus-like spread of highly leveraged large family-owned firms that could not withstand any external shock. The Asian financial crisis that started from Thailand in July 1997 brought such an external shock, one that inflicted finan-cial mayhem on Korea. The financial crisis exposed the dark side of the Korean miracle and the vulnerability of its corporate sector. In the face of massive crisis, Korea was once again ripe for a fundamental reordering of its discredited developmental alliance among the dominant actors such as state, big business and the conservative political class. Domestic outcry against unprecedented wealth concentration in a few Chaebol hands found a foreign ally in the form of the IMF. The combined forces of Korean domestic critiques and international pressure were enough to punctuate big business-centered ‘developmental equilibrium.’ Now, the stage was set for fundamental changes, however this time it was from an industrial to a post-industrial economy or from mass-production to knowledge-based services. By creating a separate Ministry of Knowledge Economy, the Korean state gave an important signal about coming structural changes.

The dynamism of an economic system lies largely on the social base of economic activities. A broader social base ensures greater participa-tion in the economy by the people, creating a dynamic impact on the system. Korea’s old agrarian aristocracy, as well as the contemporary industrial bourgeoisie, lost momentum as their social base was rather narrow. Historically, entry to the elite Yangban class was restricted by a set of barriers related to entry in the bureaucratic examination system that was a necessary precondition to become a Yangban. Similarly, only a few chosen Chaebol groups, which grew like an octopus into state-designated priority sectors, deserved state support. Both Yangban and Chaebol had very narrow social bases, which acted against them. The idea of ‘mass-participatory’ economics, popularly known as ‘Djnomics,’ was promoted to widen the social base of Korea’s economic activities. 27 Under this type of economics, the entrepreneurial spirit of SMEs received a boost; however, it has not yet been easy for Korea to move beyond the top-down capitalism presided over by the Chaebol system. 28

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In order to explain the role of the Korean aristocracy in providing social stability and enormous economic dynamism, it has been argued that the energy generated by collective resistance and various reform efforts provided a critical push for the aristocracy–bourgeoisie to perform. It explains how the Yangban system contributed greatly in providing stability during Korea’s Yi-Joseon Dynasty, which lasted more than half a millen-nium from 1392 to 1910. Though this privileged social class was involved in a life of leisure and vehemently resisted change in Korea, however under pressure from the people’s reform drive, a section of the Yangban class embraced entrepreneurial, development-oriented ideas that were filtering through interactions with foreign delegations. This orthodox class also promoted knowledge as a social value and structured the moral fabric of Korean society. Similarly, the Chaebol-led industrial bourgeoisie contrib-uted to stability and rapid economic growth, which led Korea’s successful transition from the agrarian to industrial era. This argument holds that in the face of a vibrant student and an aggressive labor movement, the authoritarian state in Korea sought legitimacy in its economic perform-ance. Thus, the Korean industrial class, though narrow in social base, was tested day and night by the intense global-market competition through credit policies directly linked to their performance in the export sector. Operating under the constraints imposed by the Cold War era political economy that divided global surplus capital from global surplus labor, the Korean industrial system created and sustained a large middle class. This educated middle class performed the industrial– professional task needed to impel the nation’s rapid economic expansion.

The question regarding Korea’s success in the evolving knowledge economy revolves around the ‘creative destruction’ brought about by the massive financial crisis of 1997 and the national debate about the systemic malaise that developed during the ‘high-debt, high-growth’ phase. The post-1997 crisis Schumpeterian ‘creative destruction’ in the form of extensive reforms in the Chaebol system led to a wider restructuring of state–society relations. In the face of these unfolding changes, Korea’s traditional collective solidarity started to give way to individual creativity, entrepreneurship and a substantially increased appetite for experimentation and exploration. The economics of indi-vidual ingenuity and creativity can be seen in the rapid expansion of Korea’s cultural industry. 29 Similarly, social transformation that permits creativity and entrepreneurship created Korea’s success in the new ‘techno-scientific spheres,’ producing cutting-edge semiconductors and software-embedded high-tech hardware in the field of smart phones, computers, defense equipments and so forth.

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1.4 Structure and organization

Chapter 1 locates Korea’s twin political–economic transitions – agrarian to industrial and industrial to post-industrial – in the wider debates about change found in the literature of economic develop-ment. It argues that not only prevailing analytical perspectives based on ‘market,’ ‘state and world system,’ ‘culture,’ and ‘colonialism’ were responsible for shaping national developmental priorities, but these perspectives largely ignored ‘societal forces’ under the framework of the ‘second state’ that played a crucial role as building blocks for the incremental changes that finally contributed in overall punctuating the age-old equilibrium in Korea. By highlighting societal forces that twice successfully restructured and rationalized Korea’s ‘bourgeoisie impulse’ – once, by ending Yangban-dominated agrarian aristocracy, and a second time by restricting Chaebol-dominated, debt-driven indus-trial expansionism – it has been argued how Korea’s common people made enormous sacrifices through various resentment and rebellious movements and then more recent civil-society-led citizens’ move-ments in propelling their demand for a much more egalitarian political economy. It identifies two notable disjunctions in the Korean political economy – redistribution of land post-independence and restructuring of industry post-1997 crisis – that decisively tilted the balance in favor of structural changes. Though, in both instances foreign forces tried to take credit for change, contrary to the general perception, analysis here highlights the contribution made by the ‘second state’ that really created a firm base for incremental changes leading to the ‘punctua-tion of equilibrium.’ Analysis accepts that the action taken by foreign agencies served as a ‘stimulus’ to change, but it was indigenous forces that made external variables react.

Chapter 2 identifies the shifting dynamics of the Korean political economy in reference to twin transitions challenging deeply entrenched agrarian as well as industrial interest groups. In questioning Korea’s aris-tocratic–bourgeoisie order, the common people of Korea, through mass movements, protests and uprisings, and civil society movements and its institutions, such as NGOs, agitated through citizens’ movements, served as ‘incremental pressure’ that, along with foreign interests, was able to ‘punctuate’ the centuries of agrarian stranglehold of the Yangban aristocracy and, in recent times, reformed the nation’s industrial bour-geoisie. The effects of punctuating the equilibrium on two occasions – in the 1950s with land reform and in 1990s with Chaebol reform – brought wider society into the nation’s process of economic development. The

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assertion of the ‘second state’ through mutual embeddedness of state and society was successful in enlarging the social base of Korean capi-talism. This broadening of the social base brought dynamism to the Korean economy, which is powering the nation to cross both transitions rather successfully.

Chapter 3 traces the evolution, development and continuation of Korea’s Yangban-centered ‘agrarian aristocracy’ that promoted the forces of the status quo and, in turn, grossly undermined the nation’s true economic potential. It highlights how Korea’s historical legacy of status quo effectively hindered the process of modernization and change. In fact, the Korean state during Joseon period (1392–1910) compromised its external autonomy by accepting tributary status under Chinese hegemony; however, it gained internal autonomy with the help of aristocratic Yangban class that exercised control over knowl-edge and bureaucratic positions as well as claimed majority ownership of land. These socioeconomic controls – knowledge, jobs and land – gave the Yangban class a privileged position in the Korean political economy that experienced class benefit in suppressing social mobility and economic competition. Village-level schools worked as a central institution for the Yangban elites, who exercised effective control in the school curriculum and by which restricted the flow of information and knowledge.

It argues that Joseon Korea created a centralized bureaucratic monarchy imbued with neo-Confucian values over an overwhelmingly agrarian economy. Under the weight of a centralized administrative apparatus closely aligned with the local Yangban elites, Korea’s produc-tive forces represented by the commoner class could not demand their rightful place in society. Productive forces remained dormant during the long period of stability under the Joseon Dynasty. Consequently, agrarian Korea remained economically poor, socially stagnated, politi-cally conservative and externally dependent. Analysis here clearly shows that Korea’s old order was decisively coming to an end, but there were only faint hints of the coming new order. Reeling under the burden of the unproductive aristocracy, pre-colonial Korea responded to the pres-sures emanating from the new forces of commercialism, industrialism and imperialism by becoming inward-looking and adopting policies of seclusion and isolation.

Chapter 4 delves into Korea’s inadequate response to the fast-unfolding external reality leading to Japanese colonial subjugation that began in 1910. A centralized colonial state embarked on building a founda-tion for Japan’s ultimate dream of assimilating Korea into the so-called

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‘Greater Japan.’ In a bid to realize this dream, the colonial state tried to demolish Korean identity patterns by making concerted efforts to submerge Korean identity into Japanese imperial identity. The Korean Yangban class collaborated with a ‘centralized, top-down Japanese colo-nial administration’ in return for the continuation of its privileged status. The chapter examines how the old aristocratic Yangban class found greater space in return for their collaboration with the Japanese interests as the size of their landholdings became substantially larger during the colonial period. This led to the enormous plight of real farmers, largely converted into tenants. The chapter points to the fact that the colo-nial political economy greatly strengthened the unproductive force of absentee landlords and, in turn, extended the historical suppression of productive forces in Korea.

It analyzes how Japan, an industrial-entrepreneurial power, care-fully promoted in the colony this parasitical class that historically suppressed productive-entrepreneurial forces in Korea. The Japanese replaced the old and corrupt authority mechanism of the Joseon Dynasty with a legal-national authority and created a competent civil service that provided a protective superstructure for colonial rule. The elaborate colonial administration implemented several policies to remove the legacies of the Joseon Dynasty and made structural changes in the Korean political–socioeconomic sphere. The feudal structures and traces of slavery were replaced by a centralized, modern, bureaucratic, legal-national authority. It points out that the governor-general did build an extensive infrastructure and industrial base and laid down the foundation for modernization of agriculture; however, a well-thought-out strategy in the development not only minimized the benefits for Korea but created other structural barriers to their growth. Therefore, at the end of colonial rule, Korea remained mostly rural, poor and much more impoverished than at the beginning of colonial rule. Koreans were largely at the receiving end, either losing land to Japanese farmers, or lining up for subsidies, loans and other permits for industry.

Chapter 5 examines the mobilization of societal forces leading to the building up of incremental pressure that finally caused the crumbling of Korea’s Yangban agrarian aristocracy. The reform pressure build-up by the social forces was represented by ‘people’s committees’ that acted as a firm base to marshal grassroots mobilization. The victory of the Allied forces in World War II resulted in the humiliating surrender of the Japanese military on the peninsula. The arrival of new occupation forces, independence fervor, the Korean War (1950–3), national division,

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popularity of Communism, and far-reaching land reforms – all leading to the demise of a political economy that for long effectively suppressed the productive-entrepreneurial impulse of Korea. It highlights how, on liberation day, August 15, 1945, the Committee for the Preparation of Korean Independence (CPKI) established the Korean People’s Republic (KPR), which clearly outlined a political economy based on the rejec-tion of both capitalism and colonialism. The chapter highlights how exemplary unity between the Korean working class and the KPR alarmed the United States. Sensing a wider ideological threat, the U.S. military quickly decided to dismantle the KPR and its people’s committees in southern Korea. In a bid to build a base for a counter political force, the United States supported a small Korean minority consisting of large landowners and colonial collaborators. Blessed by increasing assurance from the unfolding U.S. policy, wealthy Koreans established their own political party, the Korean Democratic Party (KDP), on September 16, 1945. Anxious to offer an alternative to the Korean People’s Republic, the KDP issued a call for the recognition of the Korean Provisional Government as the official government of Korea. Considering the unprecedented politico-ideological changes unfolding in Korea, U.S. resolved to construct a viable political alternative capable of dislodging the rising tide of Communism. It stresses how the United States zeroed in to contain Communism and thus brought in Syungman Rhee, who was ‘too nationalistic, too anti-communist, too authoritarian, and too difficult to work with,’ but for the sake of defeating Communism in Korea, the United States accepted an autocratic ruler.

Chapter 6 analyzes the post-land reform ‘level playing field’ with the return of egalitarianism that provided a firm ground for instituting a labor-intensive mass-production industrialization drive leading to the nation’s first transition from the agrarian to the industrial era. The successful land-reform program empowered the vast Korean majority and paved the way for the promotion of productive forces during the export-boom under the Park Chung-Hee administration. It analyzes how a structurally transformed Korean political economy presided over by military dictatorship constructed the ‘plan-rational capitalist devel-opmental state’ and a model capitalist firm, Chaebol, that facilitated the rise of Korea’s industrial class. By promoting exports, this political economy constructed elaborate structures and incentives to promote the real economy, led by productive and entrepreneurial forces, and curbed forces of consumption and speculation. The Korean economy demonstrated dynamism, and the nation successfully moved from a poor agrarian to a prosperous industrial economy.

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It also indicates that the ‘miracle on Han River’ that was made possible due to an alliance between a powerful state and big business, kept labor at the margins. In fact, the close government–business rela-tionship created ‘crony capitalism’ and its relentless drive for accumula-tion. Progressive politics, along with a strong civil society movement led by powerful NGOs, provided a vocal critique of unprecedented wealth-concentration under a few family-owned business conglomer-ates. The Korean state, a senior partner in the developmental alliance, began to lose control over gigantic conglomerates that saw size as a guar-antee against any future default. The chapter shows how Korea became the victim of its own success when a crippling financial meltdown in 1997 put the nation’s economy into a severe crisis. This shocking crisis provided a grim reminder that Korea’s first transition from the agrarian to the industrial era had not only a glittering, but a dark side as well.

Chapter 7 examines how the financial crisis of 1997 worked as a cata-lyst to punctuate yet another equilibrium formed by a ‘developmental alliance’ between an interventionist state, Chaebol and a conservative polity. Reform and restructuring that followed the financial crisis pushed Korea towards a second transition: from an industrial to a post-industrial era. It points to the important fact that ‘organized from the top,’ Korean capitalism degenerated into ‘crony capitalism’ in which political lead-ership generated rent in return for making economic favors to a few chosen ones. It focuses on how Korea’s fascination with a ‘high-debt, high-growth’ model led to a ‘manufacturing-trap’ and created pockets of inefficiency, corruption and excessive competition. Chaebols that once followed religiously the state’s export-led industrialization drive, started to dictate terms to the state, in the process complicating national economic management. The corporate race to become gigantic as a guarantee to secure state support led Chaebols to resort in cut-throat, self-defeating competition. Korea’s authoritarian polity with an interventionist state, highly leveraged Chaebol, and repressed national finance met with the end of the Cold War, the rise of global finance and emergence of a knowl-edge-based global service economy – this mismatch created a drastically different environment requiring deep structural changes, which Korea failed to deliver. The result was the devastating financial crisis of 1997, which provided the grim reminder that what Park Chung-Hee built must be restructured. It showed how the IMF bailout conditions provided the final push to the already-existing criticism of Chaebol, from the progres-sive political class, academicians and policy experts.

It highlights how once-unquestionable Chaebol got the blame for bringing the nation down into a massive financial crisis and, thus, came

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under strict societal scrutiny led by an empowered civil society move-ment. Civil society activism for economic justice got a boost with the ‘Law on Promotion of Non-profit Civil Organizations’ in December 1999. The large NGOs transformed once-antagonistic state–society relations into a more cooperative framework. Earlier era radical people’s movements demanding structural changes were replaced by citizens’ movements demanding certain legislation to fix the pre-existing capitalist system. These demands seeking changes in legislations had a limited mandate and were aimed only to correct anomalies in the capitalist system, not the system itself. In other words, capitalism versus Communism debates moved to become capitalism versus capitalism discourse. It notes how the Korean state, its empowered civil society and emerging progressive polity created ‘incremental pressure’ that led to ‘punctuated equilib-rium.’ The crisis and the consequent disequilibrium threw open Korea’s ‘crony capitalism’ to greater societal scrutiny aimed at ‘reorganizing capitalism from the bottom.’ This new consensus helped Korea broaden the social base of its economic system.

In the presence of established interest groups reforming the nation’s political economy is a daunting task, but coming out of a different polit-ical spectrum, the Korean government under Kim Dae-Jung’s leadership showed courage and resolve to carry out deep-seated structural measures in industrial, financial and social sectors. In the post-1997 financial crisis period, structural changes in the Korean political economy included democratic consolidation, transition from ‘developmental state’ to ‘post-developmental state,’ rationalization of the corporate sector through promotion of SMEs, and far-reaching reforms in the financial as well as labor sectors and so forth. It argues that Korea is confronting yet another transition, from an industrial to a post-industrial era and, to the surprise of many, rather successfully.

Chapter 8 explains structural changes causing the emergence of a ‘developmental-cum-neo-liberal state’ that skillfully incorporated elements from its ‘developmentalist past’ when the state strongly inter-vened in the economy, and from the neo-liberal idea of a market-based economy. Analysis points to the fact that Korea was able not to totally fall into the 2008 global financial crisis due to its insistence on preserving a real economy based on a restructured export machine. Even in facing the neo-liberal onslaught, the Korean state never allowed financial-industry-led speculative activities to take an upper hand over the real economy. Though foreign capital domination in the Korean economy increased considerably, the state managed to preserve the autonomy of its productive export sector. The chapter highlights how Korea’s efforts

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to take firm steps in the emerging knowledge economy contributed to the nation’s strides in consolidating its position in the post-industrial era. It discusses Korea’s bitter experiences in the handling of the 1997 financial crisis and effectively utilizing those experiences to face 2008’s global financial uncertainties. The chapter points to the fact that Korea’s self-help mode was crucial in creating realistic policies such as reduction in the reliance on Western markets and instituting policies facilitating inroads to Chinese, Southeast Asian and BRICS markets. Korea’s hybrid ‘developmental liberalism’ has emerged as a new model of capitalist development that is much more resilient in facing the persistent uncer-tainties of contemporary capitalism.

Chapter 9 views the Korean political economy retrospectively. It concludes that the assertion of social symbolized by sacrifices made by the people of Korea prepared a firm ground for incremental changes that helped foreign agencies – first, the U.S. Occupation Administration instituting land reforms, and second, IMF conditions demanding Chaebol reforms, and causing equilibrium to be punctu-ated twice. It confirms how the destruction of the Yangban-centered political economy created a crucial ‘level playing field’ on which Korea created the ‘miracle on Han River.’ However, from the beginning this miracle suffered from a narrow social base and created ‘crony capi-talism’ that led to the emergence of an ‘internal capital market’ and associated complexities. This systemic malfunctioning, along with uncoordinated financial deregulation, pushed Korea into a massive financial crisis in 1997. Once again, Korea faced a challenge: how to punctuate equilibrium dominated by big business and deconstruct various structures of an interventionist ‘developmental state,’ reform the highly leveraged Chaebol and deregulate a repressed financial sector. Korea demonstrated unprecedented resolve to carry out painful structural adjustments as a broader base of citizenry supported reform and restructuring efforts. However, equilibrium in both instances was finally punctuated by a foreign agency that tipped the balance in favor of change. Unlike Japan, restructuring in the aftermath of the 1997 financial crisis made Korea swiftly bounce back, though with certain associated costs such as loss of corporate ownership by Korean national capital and increased foreign debt. It concludes that post-crisis restructuring is reinvigorating the nation’s knowledge economy and, in the process, transforming Korea’s industrial economy into a vibrant post-industrial economy.

On the back of an empowered civil society and awakened citizenry, the Korean political economy has been successful in making required

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transitions by recasting its capitalist system to enlarge the base of its industrial pyramid. The real turnaround in the Korean political economy has come from the broadening of the social base of that economy. In the face of formidable interest groups like Chaebol, the successful recasting of Korea’s political economy offers some valuable lessons for making contemporary capitalism much more vibrant and resilient.

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261

agrarian aristocracy, 51, 53, 102, 208aristocratic yangban, 7, 22, 23, 84rural Korea, 65, 83, 96suppression of productive forces, 23yangban aristocracy, 6, 17, 83, 85,

205agrarian interest-group, 170agriculture sector, 41, 127

agrarian interest groups, 34Farm Product Price Maintenance

Law (1961), 127grain-loan system, hwan’gok, 56post-war agricultural policy, 102

aid-dependent, 35, 142alliance system, 41, 156

alliance partners, 40American Office of the Property

Custodian (AOPC), 104anti-Americanism, 155

American military, 89dependent position, 114

anti-communism, 33, 35ideological confrontation, 7ideological rivalry, 142policy of containment, 108preemptive apprehension

(elimination of leftist in Korea), 90

apology mission (to Japan), 63Fukuzawa Yukichi, 63Kim Ok-Kyun (1851–94), 63Pak, Yong-Hyo (1861–1939), 63

ascendancy of finance, 199, 200global finance, 25, 39, 189liberal finance, 192regulated finance, 197

Asian financial crisis, 145, 185, 188, 195

crony capitalism, see capitalismKorean financial crisis (1997), 174Southeast Asia, 6, 39, 119, 151, 187,

192Asian values, 188, 194, 196

buddhism, 58, 143confucianism, 13, 145

confucian classics, 146confucian culture, 12confucian family, 145confucian literati, 146confucian moral code, 205confucian moralist worldview,

205confucian values, 22, 57

shamanism, 65assimilation during colonialism, 72,

80demolish Korean identity, 79greater East Asia co-prosperity

sphere, 80greater Japan, 23, 141naeseon ilche, 79, 80, 81naeseon yuhwa, 79

associational revolution, 179global associational revolution, 177Law on Promotion of Nonprofit

Civil Organizations, 177NGOs, 8, 16, 25, 26, 204, 207

CCEJ (Citizens’ Coalition for Economic Justice, 1989, 179, 180

fourth governmental branch, 178PSPD (People’s Solidarity for

Participatory Democracy, 1994), 179, 180, 204

authoritarian Korea, 170authoritarian rule, 4, 35, 153, 154political authoritarianism, 153

banking system, 15, 118, 119, 124, 131, 168, 197

bank-based financial system, 162BOK (Bank of Korea), 44, 157, 158,

168, 193BOK (Bank of Korea) Act (December

1, 1997), 157nationalization of banks (1960), 168

Index

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262 Index

BK (Brain Korea), 21, 183, 201incubation, 201, 204NURI (New University for Rgional

Innovation), 183, 201research funding, 201

bourgeoisie, 18, 36, 37, 141, 167, 203, 205, 206

bourgeois impulse, 21, 141Korean bourgeoisie, 141–142Korean industrial class, 20national bourgeoisie, 37

Bretton Woods system, 198, 196BRICS countries, 197bureaucracy, 6, 86, 129, 130, 131, 132

Bureaucratic examination system, 19

bureaucratic parasitism, 35bureaucratic-aristocracy, 69

Cairo Declaration, December 1, 1943, 88

Cairo communiqu, 88due course, 88

capital markets, 132, 165, 169, 170, 200

capital market-based financial system, 162, 192

internal capital market, 148, 168stock market, 155, 193

capital-market-based system, 170, 192, 207

KOSDAQ (Korea Association of Securities Dealers Automated Quotation), 166

capitalism versus capitalism, 26, 178citizens’ movement, 8, 15economic justice, 49, 92minority shareholders, 49, 190

capitalism versus socialism, 178people’s movement, 7, 15, 49, 177,

178, 179, 204people’s resistance, 3, 89

chaebol phenomenon, 123family-owned chaebol firms, 37

cheap labor, 172labor-intensive, mass-production,

113, 148, 206Chinese hegemony, 6, 22

tributary status, 22, 109

tributary system, 3, 58Chun Doo-Hwan regime (1979–88),

115Gwangju uprising (1980), 154, 155Inhae foundation, 173

chusapa, 155civil society, 15, 21, 49, 177, 178, 204

Simin-Minjung movement, 176civil-service exams, 130, 131

entry barriers, 205scholar-officials, 54, 130yangban system, 5

civil-society, 25, 178cold war era, 20, 36, 40, 41, 92, 114,

118, 142cold war era constraints, 36cold war political-economy, 199cold war polity, 39, 151, 171ideological contest, 70strategic constraints, 114, 142

collaborators, 69, 83, 95, 96banmin teugwi, 1948, 83chinilpa, 83

colonialism, 13, 14, 73, 81, 95colonial administration, 14, 74, 76,

79, 80, 81, 83colonial Korea, 13, 22, 33, 70, 72, 170colonial modernity, 14colonial state, 74direct colonialism, 141, 142economic drain, 71, 73, 75, 77, 79,

81, 83Japanese colonialism, 73, 77, 81,

109, 141, 170Miura Goro (1847–1926), 69

communism, 7, 24, 70, 93, 95, 99, 100communist, 35, 91, 94communist ideology, 40communist movement, 96, 109Korean Communist Party, 82, 88North Korean land reforms, 97

land reform, 7, 31, 34, 66, 99, 100, 101, 102, 109, 125

jeonbo = 0.992 hectares, 34kwangmu land Survey, 77land redistribution, 33, 99, 100,

107, 206Land Reform Act (June 1947),

99

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Index 263

communism – continuedland-distribution law (1949),

33, 100level playing field, 4, 34, 41,

44, 113national land administration,

99 revisionist communist pressure, 35

concentration of wealth, 7, 45, 206, 207

chaebol, 18, 21, 22, 38, 120, 122Daewoo corporation, 151, 152

Kim Woo-choong, 152diversified industrial groups, 38Hyundai, 38, 114, 120, 124, 125,

162LG (former Lucky Goldstar), 114,

118, 125octopus-like spread, 114, 122, 125Samsung, 38, 46, 114, 119, 120,

124, 162consciousness, 59, 109, 144, 154, 176,

201collective consciousness, 201collective solidarity, 144, 145, 208homogeneity, 176individual consciousness, 145, 201

individual creativity, 20, 208convergence of interests, 95

consumption-era-based interest articulation, 176

production-era-based movements, 176

corporate governance, 144, 162, 184CEO, 46, 207

owner-CEO, 46professional CEO, 46, 207

life-long job assurance, 46, 207managerial hierarchies, 144

corporate ownership, 27, 43foreign ownership, 169, 193national equity, 184

corruption, 65, 71, 86, 104, 109, 153cronyism, 48, 109, 168election fraud, 105state-business nexus, 43

creative destruction, see Schumpeterian creative destruction

spread of knowledge, 9credit policies, 20, 134

credit-rationing, 140credit-rationing system, 140 policy loans, 38, 118, 119, 120, 134,

167culture of dissent, 129, 153

counter-cultural cafes, 154 minjung activism, 129minjung consciousness, 17, 67, 154,

205 community of dissent, 17minjung movement, 109, 176

current-account surplus, 182, 185cycle of under-productivity, 205

debt-equity ratios, 125democratization, 116, 153, 164, 179

democratic consolidation, 151, 153

democratic market economy, 186democratic upsurge, 188, 194

dependent status, 36, 40Sino-centric world view, 63

Sino-centric, 63developmentalist neo-liberal, 45dictatorial regime, 105, 106

bureaucratic authoritarianism, 144, 145

military dictatorship, 18, 24, 154, 155, 176

Djnomics, 19, 116Donghak movement, 65, 66, 67, 69

anti-Japanese, 65, 66, 68, 69, 94, 96anti-landlord, 97Cho Si-Hyong (1829–98), 65Donghak peasant revolution, 1960,

65, 67downward spiral, 156, 195

East Asian developmental paradigm, 191

East Asian developmental model, 37East Asian economic miracle, 159

eastern ways, western machines, 63eastern learning, 65

East-West economic rivalry, 199rise of East Asian economies, 199trade barriers, 38

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264 Index

economic modernization, 142, 153, 154

Economic Planning Board (EPB), 116, 182

economic bureaucracy, 129, 131economies of scale, 124education fervor, 147

university enrolments, 106egalitarianism, 113, 154, 205

endogenous egalitarian ethics, 67equal field system, 64equitable political economy, 205,

207village socialism, 66, 67, 68, 85,

109, 155, 205horizontal society, 109, 205

elitism, 70, 113, 148industrial bourgeoisie, 18, 111, 113,

204privileged minority, 31, 35, 36, 146yangban class, 17, 23, 77, 83

endogenous development paradigm, 54

endogenous business community, 76

enlightenment party, 63export pessimism, 10 export

pessimists, 36export-dependent economy, 195 export-promotion, 34, 37, 114, 134,

140, 164deliberation councils, 12export incentives, 138export machine, 195, 196, 197export optimism, 135export performance, 36export targets, 131, 138Export-Promotion Industrialization

(EPI), 114monthly export meetings, 12monthly meetings, 138, 168monthly trade-promotion meetings,

138preferential credit, 135preferential tax, 135strategic industrial policy, 134, 151

external autonomy, 22, 39, 114, 143, 171

external debt, 194

corporate debt levels, 151short-term debt, 185, 194,

195external supply-and-demand shocks,

120

fair trade commission, 116farmers’ dissent, 127, 128

donghak peasant rebellion, 154Korean farmers’ association, 1981

128Korean Independent Farmers

Federation, August 30, 1947, 99

Federation of Korean Trade Unions (FKTU), 172

fighter (T’usa), 175financial crisis, 43, 153, 160, 165, 185,

188, 192financial crisis in 2008, 185financial crisis of 1997, 157financial meltdown, 5, 25, 152 fire sale, 160, 196systemic crisis, 4, 152

financial supervisory, 44, 46, 47, 169, 171

financial supervisory commission, 44, 46

financial supervisory service, 169financial system, 45, 167, 193

financial big bang, 47, 169finance capital, 199financial capitalism, 200financial deregulation, 27, 161financial repression, 123, 132,

133replace capitalism (not reform),

49flight to safety, 195focucauldian paradigm, 74fordist model, 39foreign capital, 45, 131, 156, 186, 187,

192, 193, 196, 197, 207cross-border capital flows, 115Foreign Investment Promotion Act,

November 1998, 169international capital interests, 44

foreign control, 193foreign exchange reserve, 194, 197

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Index 265

Gabo reform (1894–96), 68, 69Governor-General, 72, 74, 75, 78, 80,

87grassroots mobilization, 16, 23, 85, 94grassroots movement, 5, 204

greater marketization, 188, 194growth with equity, 190

balanced growth, 10growth-first strategy, 114, 152, 167,

171, 206unbalance growth, 10

Gyungsan-do, 204

hallyu (cultural wave), 6, 184, 202, 208

creative economy, 44cultural economics, 208cultural exports, 184, 208cultural wave, 6, 43, 202 Korean cultural wave, 6, 43, 202

Heavy and Chemical Industries (HCI), 39, 118–19

big push, 117–18, 122Nixon doctrine, 143

hermit kingdom, 3, 57policy of self-isolation, 3self-imposed isolation, 57, 58, 65

hierarchy, 114, 144, 145, 188family-sponsored authoritarianism,

145high-growth, high-debt model, 123,

124cross-debt guarantees, 190debt-led expansion, 180debt-ridden chaebol, 167debt-to-equity ratios, 125, 126sovereign guarantee, 167

horizontal community, 67minjung ideology, 177village egalitarianism, 67

imbalance in the industrial system, 162

chaebol-dominated economy, 156marginalization of SMEs, 43

IMF (International Monetary Fund), 7, 19, 25, 42, 44, 156, 174, 184, 189

IMF bailout, 25, 42, 200

IMF conditionalities, 27IMF-U.S. Treasury-Wall Street

nexsus, 199impoverished majority, 31, 68

poor peasants, 16, 65Agricultural Land Ordinance

1934, 78Arbitration Ordinance, 1932, 78

tenants, 23, 34, 54, 78, 98incremental changes, 8, 21, 27incubation centers, 204

new tech start-ups, 48, 162New-Technology Business Financing

Supporting Law, 166industrialization, 9, 14, 18, 24, 25, 34,

41, 76, 100, 115, 132, 135, 143, 206

bottom of industrial pyramid, 202Export-Promotion Industrialization

(EPI), 34, 36, 164Import-Substitution

Industrialization (ISI), 14export pessimism, 135

industrial bourgeoisie, 5, 36, 141, 203

industrial capital, 123, 199industrialized-militarized Japan,

71infant industry logic, 10

informal money market, 133kerb market, 133

inter-Korean War (1950–53), 13, 33, 85, 86, 92, 94

armistice, 93internal development theory, 55internal organization theory, 117

quasi internal organization, 12Williamson, 12

internal policy autonomy, 114international capital, 7, 36interventionist state, 10, 117, 200

state-controlled banking, 156

Japan house, 58jobless economic growth, 175, 188

Keynesianism, 133, 198Keynesian consensus, 198Keynesian economics, 10, 142

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266 Index

Kim Young-Sam, 116, 177, 178, 186globalization, 46, 116, 159, 161,

194, 207global financial crisis, 187global knowledge system, 192global marketplace, 37, 38global political economy, 36

Kim Young-sam administration, 177, 178

OECD member, 42knowledge-based service economy,

181Korea asset management corporation

(KAMCO), 44, 169Korea deposit insurance corporation

(KDIC), 44Korea technology development

corporation (1981), 166Korean capitalism, 25, 201

organized from the top, 179recasting Korean capitalism, 178

Korean Democratic Party (KDP), 16 September 1945, 24

Korean National Police (KNP), 96Korean People’s Republic (KPR), 95,

97 Yo Un-Hyong (1885–19470), 87

Korean People’s Republic (September 6, 1945), 24, 87–88, 94–95

people’s committees, 16, 23, 24, 70, 85, 95, 97, 205

Korean Provisional Government (KPG), April, 1919, 95

Korean University Student Association Federation (Hanchongnyon), 1975, 175

Korean venture capital, 166KTAC (Kibo Technology Advancing

Capital Corporation (1974), 166

labor disputes, 172, 173labor migration, 77labor-intensive, 24, 40, 113,

206landlord, 55, 78, 79, 97, 98

absentee landlord, 23, 33, 84

landlord-tenant system, 55landlord-tenant discord, 78

Lee Myung-Bak, 44, 193left movement, 7, 8Liberal International Economic Order

(LIEO), 196liberation, 14, 24, 88, 102

CPKI (Committe for the Preparation of Korean Independence), 1945, 24, 87, 95

samil movement (March 1919), 17, 81, 82, 204

Choe Nam-seon (1890–1957), 81

independence movement, 81, 94

loan-guarantee program, 165lost decade (Japan), 183, 191

bubble-bursting in the late 1990s (Japan), 191

low-level developmental equilibrium, 205

manufacturing-trap, 25falling profitability, 161, 165, 180trap of falling profitability, 180

marginalization of the region, 204Jola-do (province), 204

market paradigm, 36, 201market conformity, 121, 134, 135,

148market fundamentalism, 9,

186market-distorting, 121, 133market-mediated, 12, 148, 168rolling back of the state, 43

mass-participatory democracy, 43mass-production industries, 34, 115,

144, 145mass-production, 5, 11, 31, 42,

166, 185, 206Ministry of Knowledge Economy

(MKE), 48miracle, 4, 25, 31, 113, 148, 170, 180,

203, 206miracle on Han river, 4, 25, 27, 113,

148, 170, 206modernization, 22, 23, 54, 59, 62,

139, 153autonomous modernization, see

donghak movement

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Index 267

national assembly, 17, 89, 91, 96, 100, 101, 178, 180

national developmentalism, 118 national political economy, 36, 39,

47, 114national capital, 27, 36, 39, 160,

186, 187, 196national capitalist class, 143national industrial bourgeois, 114

National Traitors Act (1948), 91nationalist scholarship, 13, 14, 74

sprout school, 14sprouts of capitalism, 54

nature of the Korean state, 45, 158, 160

developmental state, see statist paradigm

developmental alliance, 11, 19, 25, 145, 152, 180

developmental determination, 113, 138

developmentalist lobby, 197entrepreneurial state, 117pluralist-supportive role of the state,

45post-developmental state, 26, 158

developmental liberalism, 27, 185, 195, 201, 202

developmental-cum-neo-liberal state, 26

regulatory state, 44, 158, 160, 194techno-scientific state, 160, 201

neo-classical economics, 9neo-classical framework, 9neo-confucianism, 55, 60, 144, 146

moral economy, 56moral political economy, 70

neoliberalism, 185, 186, 187, 190, 195, 201

anglo-american model, 192neoliberal developmental statism,

182neoliberal orthodoxy, 192, 198neoliberal transformation, 187Washington consensus, 192, 196,

197, 199network (social ties) theory, 117new Korea company (former oriental

developmental company), 98

non-performing loans, 44, 124, 125, 184

Northwest Youth Association, 90notion of hierarchy-authority, 144

occupation administration (U.S.), 17, 18, 27, 32, 36

general order no. 1 (regarding existing Japanese government structure in Korea), 95

ordo-liberalism, 159social market place, 155, 159

parasitic system, 102parasitical class, 23, 205parasitical elite, 57, 59parasitical yangban, 107

Park Chnug-Hee regime (1961–79), 115

Park Chung-Hee, 4, 13, 14, 18, 25, 36, 39, 107, 131, 179, 206

Park Geun-Hye, 193, 202patrimonial authority, 115policy autonomy, 6, 39, 107, 114

external policy autonomy, 114internal autonomy, 22, 39relative autonomy, 118

political capitalists, 18, 35, 108, 142

political-economic regimes, 121post-1997 financial crisis, 31, 182, 188

structural reordering, 153post-colonial state, 34post-fordist, 195, 198

MNCs-led economic system, 195post-fordist world economy, 198

post-industrial era, 25, 27, 183global knowledge economy, 185post-industrial consolidation, 182,

185post-industrial society, 6, 32, 43,

48, 160post-Korean war reconstruction

policy, 93dependent capitalist, 86foreign aid, 93, 103Rhee administration, 35, 36, 83,

86, 90, 92, 93, 100, 102, 108, 109, 131

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268 Index

power vacuum (theory), 58, 71, 140international rivalry, 109

practical-learning (sirhak), 64Yi Ik (1681–1763), 64Yu Hyong-Won (1622–73), 64

pre-modern framework, 57pre-colonial Korea, 70

priority sector (lending), 133private academies, 64

sowon (important center of learning), 64

pro-production bias, 206product cycle, 40productivity increases, 41progressive intellectuals, 15Progressive Party (Chinbo-dang), 62,

105public funds (injection of public

money), 182, 184, 185, 188punctuated equilibrium theory, 17

incremental pressures, 65

rate of capital accumulation, 191rebellions, 8, 17, 56, 75, 89, 148, 204

Jeju, Yeosu and Suncheon rebellion, 91

Jeju-do rebellion, 97student revolution, April 19, 1960,

18, 113recession-like economic growth (in

post-bubble Japan), 42, 165, 191

redistributive agenda, 35land-distribution, 17, 33, 99, 100

reform and restructuring, 197chaebol reform, 8, 16, 21, 22, 31,

32, 46, 161, 207financial reforms, 46, 168labor reforms, 170, 175

casualization of labor, 174comprehensive land survey, 78labor exploitation, 41labor law of 1953, 172labor marginalization, 170marginalization of labor, 31, 42tripartite commission (1998), 160,

174, 180, 187social transformation, 20, 75, 99,

208reform capitalism, 49reformist confucian school, 55

regime transformation, 34rent-seekers (collecting rent out of

foreign aid), 35repatriated property, 104

AOPC (American Office of the Property Custodian), 104

disposal of enemy property, 104repatriated assets, 104Repatriated Property Liquidation

Law (1949), 104Special Law to Redeem Pro-Japanese

Collaborators Property, 2005, 83

reverse-engineering, 164Roh Moo-Hyun, 44, 91, 188

truth and reconciliation commission of Korea, 91

Roh Tae-Woo, 91, 114, 116rule of law, 152

saemaul movement, 127declaration of independence, 81pagoda (park), 82rural revitalization campaign, 74, 79village leaders, 79

scholar-official class, 6schumpeterian creative destruction,

20, 208scientific solutions (required after

navihation in high-seas), 53second-state, 8, 204

second-state perspective, 8Selected Amendment Bill to the

Constitution (1954), 105Rounding-off Amendment Bill

(1954), 105self-help, 11, 27, 117, 197

fear of abandonment (after Nixson’s visit to China), 11

Seo Jae-Pil (1864–1951), 97independence club, 66Kapsin coup (1884), 97

share of foreign capital, 193share of foreign ownership, 193Sino-Japanese, 58, 66, 81, 108

Sino-Japanese rivalry, 66Sino-Japanese War, 66, 81, 108

SMEs (Small & Medium Enterprises), 19, 31, 41, 45, 47, 158, 162, 164, 165, 166, 179, 207

Korea funds of funds (2005), 166

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Index 269

SMEs (Small & Medium Enterprises) – continued

primary collateralized bond obligation, 1999 (P-CBO), 167

SMEs fund, 48societal forces, 86

dormant productive forces, 148, 204, 206

productive forces, 22, 23, 24, 60, 84, 107, 115, 121, 148, 204

socioeconomic status quo, 205South Manchurian railway company,

see colonialism, Japanese colonialism

speculation, 24, 116financial bubble, 200speculative activities, 26, 115, 193,

198, 200speculative transactions, 193

state of stasis (barter limiting money circulation), 56, 57

State-War-Navy Cordinating Committee (SWNCC), 88

state-business alliance, 132junior partner, 37, 41Korea Inc., 115, 121senior partner, 41

statist paradigm, 27, 36, 37, 172, 182, 187, 200, 201

rolling back of the market, 198state controlled finance, 37state intervention, 11, 133, 140state patronage, 142state-bank chaebol nexus, 186state-big business alliance, 36state-big business coordination, 39state-owned enterprises, 38statist market, 159

Syungman Rhee, 33, 96, 105anti-communist strategy, 95April 19, 1960 revolution, 106autocratic rule, 35KPG (Korea Provisional

Government), 95, 96

tenancy, 56, 97transition, 4, 8, 26, 32, 43, 142

agrarian and industrial, 8, 204first transition, 5, 24, 25, 42, 180, 181industrial to post-industrial, 21, 43,

181, 208

second transition, 25, 43, 111, 181transition (to market) economies, 196

treaties, 40, 57, 58, 61, 62, 63, 66treaty of Chemulpo (1882), 63treaty of Ganghwa (February 1876),

61–62treaty of Shimonoseki, April 17,

1985, 66

U.S. Wagner Act, 172Labor Law of 1953, 172

United Nations, 33, 89, 93, 130UN Temporary Commission on

Korea (UNTCOK), 89unproductive force, 23, 84

unproductive agrarian aristocracy, 205

unproductive-parasitical yangban class, 107

USMGK (United States Military Government in Korea), 33

vendors, 47, 133, 154venture capitalism, 160, 165, 166

venture capital industry, 166Special Measures Law for Fostering

Venture Business, 166

wage increases, 41, 192Western contacts, 57

Hendrick Hamel (1630–92), 61Matteo Ricci (1552–1610), 60USS General Sherman (1866), 61

Wilsonian moment, 81working class consciousness, 154world system theory, 10

Yeosu rebellion (1948), 97Yi Tuk-Ku, (rebel leader), 90Yi-Joseon dynasty, 17, 20

King Kojong, 62King Taewon-gun, 62, 63, 66Queen Min, 69, 108

Min Clan, 63yushin regime, 127

Special Law Concerning National Defense and Security (1972), 172

zaibatsu (Japanese business conglomerate), 123

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9781137451231 01 pre colonial perspective 13 1.2.5 bringing the ‘second state’ perspective 15...

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