chapter  10
13 Pages

The developmental state and the neoliberal transition in South Korea

ByHAE - YUNG SONG

The rapid economic development that took place in the post-war period in South Korea (hereafter ‘Korea’) has often been identified with a distinctive type of state, the developmental state. Numerous analyses have been conducted on the Korean state, and academics and policy-makers alike have exploited exhaustively the term ‘developmental state’ since Chalmers Johnson first coined it in the early 1980s referring to the Japanese case. Contrary to the wide usage of the term, and despite the fact that this is a heavily documented field, the statist assumptions of the developmental state analysis have more often been taken for granted than inquired into and problematised. Current discussions on the transition of the Korean state towards neoliberalism have hardly advanced from, and are still conditioned by, the statist presuppositions attached to the developmental state. The aim of this chapter is to address the theoretical flaws inherent in the statist understanding of the developmental state, and how they condition the analysis of its transformation. The developmental state is characterised by Chalmers Johnson (1982, 1987, 1995), Alice Amsden (1989, 1994) and Robert Wade (1990, 1992, 1998a, 1998b) as one that stands above society and narrow interest groups and, especially, the capitalist class. According to this view, the developmental state, being in possession of the discretionary power to allocate financial resources, was able to direct and discipline enterprises so that they would invest in strategic sectors under a long-term developmental and industrial plan. These propositions have been contrasted with those of market fundamentalists (e.g. Bhagwati 1978; Krueger 1978; World Bank 1993), who understand the rapid economic growth of Korea as the outcome of free market or market-conforming policies. However, understanding the developmental state in terms of an opposition between the state and the market, that is, whether the state or the market brought about rapid growth, necessarily confines the analysis of its transformation within the same dichotomous framework. If the developmental state is defined in terms of the degree to which it intervened in the economy and controlled capital for national development, its transformation is, naturally, seen primarily in relation to whether the state still exercises this power over capital and how heavily it directs development. Consequently, it is normally concluded that either the developmental state has survived, and maintained its commanding role over

the capitalists (Lee 2001, 2002, 2006; Weiss 2005) or, alternatively, that it has metamorphosed into a regulatory (neoliberal) state because market rules now take precedence over state discretion (Jayasuriya 2005; Pirie 2005, 2008; WooCumings 1997, 1999). The methodological assumptions underpinning the state-market dichotomy also traverse the internal-external dichotomy. As the developmental state, and state-market relations, are examined in the national framework, the financial crisis of 1997-8, when the neoliberal reforms accelerated, was largely perceived as having been caused by external pressures (Wade 1998a, 1998b; Wade and Veneroso 1998; Gowan 1999; Harvey 2003). Alternatively, the crisis has been blamed on elite policy choices, although there are diverging views over whether these choices have been either rational and successful (Mathews 1998; Pirie 2005, 2008), or failures (Chang 1998; Chang and Yoo 1999). Most Marxist accounts, that should be sensitive to the class dimensions of capitalism, hardly transcend statism when assessing the developmental state. For instance, Robert Brenner attributes the rapid growth of the East Asian economies to their developmental states and the close national networks between states, firms and banks (Brenner 1998: 150). In his critique of US financial imperialism, Peter Gowan maintains that US imperialism compels the development models of Japan and the East Asian countries to converge towards neoliberalism. In this transformation, he claims, ‘the pattern of Japanese capitalist expansion has been different in the eighties and nineties simply because Japanese capitalism has been far more genuinely productive as a national capitalist system than the capitalism of the Atlantic world’ (Gowan 1999: 127). David Harvey distinguishes between different kinds of capitalist development. He does not raise the issue of the developmental state directly, but his understanding of state-led development can be drawn from his conceptualisation of the ‘new imperialism’. His distinction of US imperialism between ‘hegemony-based imperialism’ (1945-70) and ‘neo-liberal imperialism’ (1970-2000) is linked to his basic contrast between capital accumulation through ‘expanded reproduction’ and ‘accumulation by dispossession’. The first period is characterised by accumulation of capital through expanded reproduction, when ‘profits were reinvested in growth as well as in new technologies, fixed capital, and extensive infrastructural improvements’ (Harvey 2003: 57). In contrast, neoliberal imperialism corresponds to the era of financial volatility and speculation detached from production, turning to a violently predatory mode of capital accumulation that is ‘accumulation by dispossession’ (ibid.). In these analyses on the transformation of the developmental state, the notion that development is autonomous from social actors is based upon dichotomous understandings of the state-market and internal-external relations. These have become the touchstone of assessments of neoliberalism in Korea. Neoliberalism is contrasted with what supposedly characterises the preceding period, that is, the high-growth manufacturing-based development model led by the developmental state. One of the consequences of conceptualising the neoliberal transformation in this way is to further juxtapose the state against the market and the

internal against the external. In this case, neoliberalism is defined as the market taking over the state, and the external domain overriding internal (developmental) priorities. In particular, critical approaches, including the contemporary Marxist discussions outlined above, tend to identify neoliberalism with a shift from nationally-oriented and manufacturing-centred development towards finance-led development. Within this framework, the more neoliberalism is criticised, the more the developmental state appears to represent a mode of development that is ‘more national’ and ‘less contradictory’ than the neoliberal alternative. Discussing the encroachment of neoliberalism in terms of the market overriding the state, and the external taking over the internal, follows from taking for granted the statist assumptions underpinning the concept of the developmental state, instead of relating them to capitalism and the capitalist state. With capitalist development remaining unproblematised as an encompassing force that reorganises in a particular fashion production and social relations, including politics, the state becomes an unquestioned category. It is seen as an entity external to, and interacting with, the economy. It also tends to be understood in individualistic terms, in reference to elite groups or policy-makers negotiating with other agents, such as business groups pursuing their own interests in equal terms with other (interest-)groups. The state is perceived in managerial and technical rather than social-relational terms. In brief, the capitalist content of development is taken for granted, and the question of the specifically capitalist character of the state is evaded. Social relations are reduced to the interactions between atomised units, and varieties of capitalism are categorised depending on the extent to which the state intervenes in the economy.