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Institutions and Economic Policy: Theory and a Korean Case Study

Published online by Cambridge University Press:  13 June 2011

Stephan Haggard
Affiliation:
Harvard University
Chung-in Moon
Affiliation:
University of Kentucky
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Abstract

Recent writing on the rapid growth of the East Asian newly industrializing countries—Korea, Taiwan, Hong Kong, and Singapore—has been dominated by an institutionalist perspective that focuses on the “strength” of the state vis-à-vis societal actors. A study of Korea's stabilization efforts in the 1980s underlines the importance of organizational factors in explaining policy outcomes, but also suggests important limits on institutionalist arguments. These include the absence of unique institutional solutions for political problems and the indeterminacy of institutional configuration with respect to the economic efficiency of policy. A focus on characteristics of the state alone can overlook the organizational resources of societal actors and the interest of politicians in building bases of support even in “strong” states.

Type
Research Article
Copyright
Copyright © Trustees of Princeton University 1990

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References

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10 See Haggard and Kaufman (fn. 3).

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22 For an introduction to the plan, see EPB, Heavy and Chemical Plan (Seoul: EPB, 1973). For the internal debate, see KDI, Sanup Jungchaek ui Gibon Gwaje wa Jiwon Sichaek ui Gae-pyun Bangan [Fundamental Tasks of Industrial Policy and Directions for Reform in Supportive Policies] (Seoul: KDI Research Report #82–09, 1982).

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24 World Bank (fn. 19), 19.

25 Lindauer, David, Labor Market Behavior in the Republic of Korea: An Analysis of Wages and Their Impact on the Economy (Washington, DC: World Bank Staff Working Paper No. 641, 1984)Google Scholar.

26 KDI (fn. 21), 1015–34; I' Sakong, “Gyungje Sungjang gwa Gyungjeryuk Jibjung” [Economic Growth and the Concentration of Economic Power], KDI Review 1 (March 1980), 2–13; Hankuk Ilbo, September 29, 1981, Appendix pp. 5–8; Dongah Ilbo, December i, 1984, p. 4; Leroy Jones, “Jaehul and the Concentration of Economic Power in Korean Development: Issues, Evidence and Alternatives,” in II Sakong, ed., Macroeconomic Policy and Industrial Development Issues (Seoul: Korea Development Institute, 1987).

27 The change in leadership came in December 1978. Shin Hyun-Whack replaced Nam Duck-Woo and brought young economists critical of past policy—including Rang Kyung-Sik, Suh Suk Jun, Kim Ki Hwan, and particularly Kim Jai-Ik—to positions of prominence.

28 KDI (fn. 21), 20–22, 221–56.

29 KDI (fn. 21), 22–24, 345”75, 379–7; Kwang Sik Sohn, “Gyungje Daetongryung, Park Chung Hee ui Dilema” [Economic President: Park Chung Hee's Dilemma], Chungkyung Munhwa, December 1983, pp. 66–75.

30 See Office of the President, Chun Doo Hwan Daetongryung Yonsuljib: Je 5 Gonghwaku\ Chulbum Pyun: 1980.8–1981.4 [Collection of President Chun Doo Hwan's Speeches: The Launching of the Fifth Republic from August 1980 to April 1981] (Seoul, 1981); KDI (fn. 21), 679–98, 1190–1214; EPB, Gongjung Guhlae Baiksuh [White Book on Fair Trade] (Seoul: EPB, 1984).

31 Interviews with Shin Byung-Hyun: Shin Dong Ah, November 1981, pp. 181–93; Hankuk Ilbo, August 25, 1981, p. 3.

32 EPB, Gyungje Baiksuh [White Book on the Economy] (Seoul: EPB, 1981), 73–75.

33 On the Korean budgetary process, see Shinohara, Miyohei, Yanagahira, Toru, and Kim, Kwang Suk, The Japanese and Korean Experiences in Managing Development (Washing ton, DC: World Bank Staff Working Paper No. 574, 1983), 5763Google Scholar.

34 Office of the Budget, EPB, “Kukga Yesan Donggyul gwa Jungchaek Baegyung: Gyoyu-kyong Jaryo” [National Budget Freeze and Policy Background: Educational Materials], mimeo, August 1983; Suk June Cho, “Jungbu Ginung ui Jaegyumto wa Jungbu Ginung Bunsuk Jakup” [Reexamination and Analysis of Government Functions], in Kwang Choi, ed., Kukga Yesan gwa Jungchaek Mokpyo [National Budget and Policy Objectives] (Seoul: KDI Report #83–07, 1983); Chosun Ilbo, September 23, 1985, p. 3.

35 Nelson, Joan, “The Politics of Stabilization,” in Feinberg, Richard E. and Kallab, Valeriana, eds., Adjustment Crisis in the Third World (New Brunswick, NJ: Transaction Books, 1984)Google Scholar; Bienen, Henry and Gersovitz, Mark, “Economic Stabilization, Conditionality, and Political Stability,” International Organization 39 (Autumn 1985), 729–54CrossRefGoogle Scholar.

36 Byung Suh Ryu, “Yanggok Gwanli wa Gyejung” [Grain Management Account], in Kwang Choi (fn. 34); Sung Hun Kim, “Yangjung Jungchaek ui Junhwan gwa Baegyung” [Background and Reality of the Grain Management Policy Shift], Shing Dong Ah, June 1979, pp. 176–85.

37 Office of the Budget (fn. 34), 48–50.

38 Sun Lee, “Biryo Gyejung ui Unyong Hynghwang Bunsuk” [Analysis of the Fertilizer Account Operations], in Kwang Choi (fn. 34).

39 Office of the Budget (fn. 34), 51–54; Dae Hee Song, “Gong Giup ui Nakhasansik Insa Siltae” [Revolving-Door Personnel Management of Public Enterprises], Shin Dong Ah, April 1985, pp. 404–13.

40 Lindauer (fn. 25); Funkoo Park and Tarsicio Castaneda, “Structural Adjustment and the Role of the Labor Market” (Seoul: KDI Working Paper No. 8705, 1987).

41 See Soo Kon Kim, ed., Nosa Gwangye Jungchaek Gwaje wa Banghyang [Tasks of Labor-Management Relations and Policy Directions] (Seoul: KDI, 1983); Christian Institute for the Study of Justice and Development [CISJD], Gaejung Nodongbub ui Naeyong gwa Gaesun Banghyang [The Contents of the Amended Labor Law and Directions for Improvement] (Seoul: CISJD, 1981).

42 Launius, Michael, “The State and Labor in South Korea,” Bulletin of Concerned Asian Scholars 16 (October and December 1984), 7Google Scholar.

43 Jung Suk Suh, “Daehan Nochongul Haebu Handa” [The Anatomy of the Federation of Korean Trade Unions], Shin Dong Ah, April 1985, pp. 482–508; Far Eastern Economic Review, July 19, 1984, pp. 73–74.

44 On the role of the financial sector in Korea's development, see Cole, David and Park, Yung Chul, Financial Development in Korea (Cambridge: Harvard University Press, 1983)Google Scholar; Hong, Wontack and Park, Yung Chul, “The Financing of Export-Oriented Growth in Korea,” in Tan, Augustine H. H. and Kapur, Basant, eds., Pacific Growth and Financial Interdependence (Sydney: Allen & Unwin, 1985)Google Scholar.

45 EPB (fn. 20), 34–35.

46 On the financial scandals, see Far Eastern Economic Review, May 21, 1982, pp. 52–56, and October 22, 1982, pp. 68–69.

47 Hankuk llbo, April 9, 1985, p. 4; Chosun Ilbo, May 12, 1986, p. 3; Laxmi Nakarmi and Jang Jung-Soo, “Big Business Looks Less Beautiful,” Business Korea, December 1984, p. 25.

48 Dongah Ilbo, August 22, 1984, p. 3.

49 Shin in “Daedam: Gyungje Nankuk, Himuroman Motpunda” [Roundtable: Economic Difficulties Cannot Be Solved by Force Alone], Shin Dong Ah, May 1985, p. 434.

50 These themes were widely used by the opposition. See So Woong Hwang, “Jungchi Jakum ui Hoirang”[Channels of Political Funds], Chungkyung Munhwa, December 1982, pp. 118–28; Sang Ki Sim, “Jungchi Jakum ui Naemak” [The Inside Story of Political Funds], Wolgan Choongang, October 1977, pp. 90–103; Kyung Nam Lee, “Haebang ihu Gyonryu-khyung Bujung Chukjae Saryaidul” [Cases of Illicit Wealth Accumulation through Political Connections since Independence], Shin Dong Ah, April 1985, pp. 290–311; Seung Je Koh, “Chaebol Giup gwa Bangiup Gamjung” [Chaebol and Anti-corporate Sentiment], Wolgan Chosun, August 1983, pp. 74–83. For a critical review of trends in income distribution, see Koo, Hagen, “The Political Economy of Income Distribution in South Korea: The Impact of the State's Industrialization Policies,” World Development 12 (October 1984), 1029–37CrossRefGoogle Scholar.

51 KDI (fn. 21), 897–911; “Import Liberalization Plan and Its Background,” Hanil Monthly Bulletin, April 1984, pp. 5–12; EPB, Gongjung Guhlae Eaiksuh [White Book on Fair Trade] (1983, 1984).

52 Dongah Ilbo, August 22, 1984; Hankuk Ilbo, September 20, 1984.

53 See Federation of Korean Industries, “Anjunghwa Sichaek gwa Giup ui Jakum Sajung” [The Stabilization Policy and the Financial Situation of Corporations], Chun Gyung Ryun, December 1983, pp. 28–34; “Daegiup Yosin Gyuje ae Paengpaenghan Gongbangjun” [The Feud over Credit Controls on Big Business], Maegyung, August 27, 1984.

54 The debt-to-equity ratios for Korean firms, derived from 202 of the 230 firms listed on the Korean stock exchange, are high compared even with those of Japan (3.2), which in turn are three times those of the United States (1.1). See Korean Exchange Bank, Monthly Review 18 (May 1984), 24Google Scholar; Far Eastern Economic Review, July 19, 1984, p. 44.

55 Far Eastern Economic Review, May 16, 1985, p. 92.

56 Hanhufk Ilbo, February 23 and 26, 1985; Business Korea, August and September 1985.

57 For example, when the international contractor, Keangnam Enterprises, faced bankruptcy, the Korea Exchange Bank provided loans to Daewoo to salvage the company.

58 Hankuk Ilbo, March 25, 1987; Chosun Ilbo, May 12, 1986.

59 See, for example, Far Eastern Economic Review, October 24 and November 14, 1985, and April 24, 1986; Laxmi Nakarmi, “Deputy Prime Minister Kim: Theory into Practice,” Business Korea, February 1986, pp. 14–17.

60 See, for example, Aghedli, Vijan and Ruerte, Marquez, A Case of Successful Adjustment: The Korean Experience During 1980–1984 (Washington, DC: International Monetary Fund Occasional Paper No. 39, 1985)Google Scholar; Victorio Corbo and Sang Woo Nam, “Controlling Inflation: Korea's Recent Experience” (Seoul: KDI Working Paper No. 8608, 1986).

61 Ibid.

62 Ikenberry, G. John, “The Irony of State Strength: Comparative Responses to the Oil Shocks in the 1970s,” International Organization 40 (Winter 1986), 105–37CrossRefGoogle Scholar.

63 Barry Ames argues that authoritarian regimes use fiscal policy in ways similar to democratic regimes. See Ames, , Political Survival: Politicians and Public Policy in Latin America (Berkeley: University of California Press, 1987)Google Scholar. The hardline-softline conflict is a central theme of Stepan, Alfred, Rethinking Military Politics (Princeton: Princeton University Press, 1988), 4Google Scholar.

64 Koh, B. C., “The 1985 Parliamentary Election in South Korea,” Asian Survey 25 (September 1985), 883–97CrossRefGoogle Scholar.

65 Public opinion data in Korea are notoriously weak, but from September 15–19, 1986, the pro-government Kyunghyang Daily conducted a nationwide survey. The results were so unfavorable to the government that the poll was suppressed. A copy was later obtained and published in The People's Korea, February 21, 1987, pp. 6–8. The poll showed a surprising lack of confidence in economic management; for example, 86.5 percent of respondents believed the economy to be in crisis, with only 10.1 percent optimistic. For overviews of the electoral issues, see Hankuk Ilbo, February 9, 1985; Far Eastern Economic Review, February 6, 1985.

66 On the ideological views of the students, see Park, Hyun Chae and Cho, Hee Yon, eds., Hankuk Sahoi Gusingche Ronjaeng [Controversies over the Social Formation], vols. 1 and 2 (Seoul: Juksan, 1989)Google Scholar.

67 The People's Korea (fn. 65), 7.

68 Dongah Ilbo, January 1, 1986; Maeng Ho Choi, “Repo: Silup, Daechak i upda” [Report: Unemployment, No Options], Shin Dong Ah, December 1985, 449–59.

69 EPB (fn. 20), 34–35; Chosun Ilbo, May 30, 1985.

70 Chosun Ilbo, October 17, 1986; Hankuk Ilbo, March 17, 1987.

71 The best account of the political events leading up to the presidential elections of December 1987 is James M. West and Edward J. Baker, “The 1987 Constitutional Reforms in South Korea: Electoral Processes and Judicial Independence,” Harvard Human Rights Yearbook 1 (Spring 1988), 135–77.

72 Hankuk Ilbo, December 10, 1988.

73 Oi Boong Hwang, “Repo: Haksaeng ui Nodong Undong Hyungjang” [Field Report on Students' Labor Movement], Shin Dong Ah, June 1985, pp. 466–85.

74 Chosun Ilbo, September 9, 1987.

75 Undonggwon, or the Movement Circle, refers to a coalition of radical students, intellectuals, and labor and church activists organized under the slogan of “people, nation, and democracy.” The Circle constitutes the heart of the radical opposition movement in Korea.

76 Dongah llbo, September 29, 1987.

77 See esp. Deyo (fn. 2).

78 Hankuk, llbo, March 25, 1987.

79 The economic policies of the presidential candidates are outlined in Jae Wan Choi, “Nambaldoin Gyungjegongyak, Silhyunsung Hibak Hada” [Overblown Economic Promises: Feasibility Dim], Shin Dong Ah, January 1988, 238–45.

80 Lee Jong Chan, former floor leader and an architect of the Fifth Republic, in Wolgan Chosun, January 1987, p. 155.

81 Ikenberry (fn. 62).

82 Katzenstein (fn. 17).