ABSTRACT
The 1997 financial crisis exposed the weaknesses that were inherent in the traditional Korean development model. Although mainstream economists argued that the success of the Korean economy before the crisis must be attributed to its “market-friendly” development strategies (World Bank 1993), a more plausible explanation for this success would be provided by a combination of active investment policies, export-oriented industrial policies, moderately repressed financial institutions, and specific government–firm relationships (Ok 2004). However, lessons from history indicate that the success of a development model bears its own failure. The 1997 financial crisis revealed the weaknesses inherent in the traditional Korean development model when it had to tackle new challenges such as increasing globalization, the increasing dominance of financial capital in the world economy, an obligation to introduce changes in technological learning paradigms, etc.
