Better by design: Korea's neoliberal economy

Abstract

This paper examines the processes of bank and corporate restructuring in South Korea since the 1997–98 economic crisis, and seeks to highlight how the state has intervened in a highly dirigiste manner in order to expedite restructuring in both the commercial bank and corporate sectors. At the same time it demonstrates the clear neoliberal principles that have underpinned the state's attempts to promote restructuring. The state has shown a clear determination to take action against insolvent firms and financial institutions no matter how large or strategically important they may be, to impose hard budget constraints on key economic actors. Furthermore, the state has actively sought to engineer the sale of key domestic firms and banks to foreign investors. We argue that Korea's efforts to create a functioning neoliberal economy have been largely successful and are functional from the perspective of Korean capitalism, if not the perspective of individual Korean firms. Changes in the global economy in the two decades preceding the 1997–98 crisis imposed an increasingly inescapable pressure on the Korean state to effect a neoliberal transformation and Korea's future as a centre of capitalist accumulation has for some time been bound up with the success of the neoliberal project. In conclusion, this paper seeks to draw out the broader implications of this reading of the post-crisis restructuring programme for debates on global economic liberalization and the future of capitalist diversity.