Political Economy of Korean Development(2006-1)

Graduate School of International Studies Yonsei University Political Economy of Korean Development Spring 2005 (ZJ595-01) Instructor: Sang-young Rhyu Thursday: 15:00-18:00 Office: New Millennium B/D # 619 Millennium Hall # 202 2123- 3961; syrhyu@yonsei.ac.kr Course Description This course aims to examine the Korean development and capitalism from the political economy perspective How Korean capitalism emerged, what pathway it has taken and how it will continue to evolve are the puzzles of this course This course will cover the various topics in international and domestic political economy such as economic growth, culture and network, international investment and trade, democratization, globalization, economic crisis and reform, and public and private governance In particular, we will reassess and recast the government-business relationship through further case studies of Korean conglomerates (Chaebol, e.g., Samsung, Daewoo, POSCO, and Korea Development Bank) The main focus throughout this course will be on the roles and interests of government, business, civil society, and foreign investor These four forces tend to interact and struggle in pursuit of their respective policy ideas and to build main institutions that serve their political economic interest Students are expected to cultivate and apply their own points of view and conceptual framework regarding Korean political economy This class will be comprised of lectures, discussions and student presentations There are no prerequisites for this course Requirements & Evaluation Students are required to read all assignments before class and participate in class discussions Grades will be based on class participation and presentation (20%), mid-term examination (30%) and research paper (50%) Suggested reading list Chung-yum Kim Policymaking on the Front Lines: Memoirs of a Korean Practitioner, 1945-79 (Washington, D.C.: The World Bank, 1994) Hagen Koo ed., State and Society in Contemporary Korea (Ithaca and London: Cornell University Press, 1993) Eun Mee Kim Big Business, Strong State (Albany: SUNY Press, 1997) Larry Diamond and Byung-Kook Kim Eds Consolidating Democracy in South Korea (Colorado: Lynne Rienner Publishers, Inc, 2000) John Lie Han Unbound: The Political Economy of South Korea (Stanford: Stanford University Press, 1998) Jongryn Mo and Chung-in Moon eds Democracy and the Korean Economy (Stanford: Hoover Institution Press, 1999) Gerardo R Ungson, Richard M Steers, and Seung-Ho Park Korean Enterprise: The Quest for Globalization (Boston: Harvard Business School Press, 1997) Sung-Hee Jwa The Evolution of large Corporations in Korea: A New Institutional Economics perspectives of the Chaebol (Cheltenham: Edward Elgar, 2002) Young Rae Kim, Hochul Lee and In-Sub Mah eds Redefining Korean Politics: Lost Paradigm and New Vision (Seoul: Korean Political Science Association, 2002) Joseph M Grieco and John Ikenberry, State Power and World Markets: The International Political Economy (New York and London: W.W Norton & Company, 2003) Kenneth L.Judd and Young Ki Lee, eds., An Agenda for Economic Reform in Korea:International Perspectives (Stanford and Seoul: Hoover Institution Press and Korea Development Institute, 2000) Ha-joon Chang, ed., Rethinking Development Economics (London: Anthem Press, 2004) Course Outline Week Introduction and Overview What is political economy? What are the dynamics between politics and the economy? How the four forces - government, civil society, business, and foreign investor – interact with one another? Week Contending Paradigms on Korean Political Economy Please consider the following theoretical perspectives and their relation to one another: neo-classical, developmental state, and new-institutionalism; beyond the dichotomy of state and market; miracle vs myth; culture vs institution; people vs elite; economic growth vs equity; authoritarianism vs democracy; free riding vs strategic choice; continuity vs discontinuity; economic crisis- recurrent or recovery; post-crisis debates; reform and Korean model (dismantling vs reconstructing); rule of law vs rule of man; convergence vs divergence Ziya Önis “The Logic of the Developmental State.” Comparative Politics (October 1991) pp 109-126 Chung-in Moon and Rashemi Prasad “Beyond the Developmental State: Networks, Politics, and Institutions.” Governance Vol.7, No.4 (July 1994) pp 360-386 Atul Kohli “Where Do High-Growth Political Economies Come From? The Japanese Lineage of Korea’s Developmental State.” Meredith Cumings ed The Developmental State (Ithaca and London: Cornell University Press, 1999) Stephan Haggard, David Kang and Chung-in Moon “Japanese Colonialism and Korean Developm ent: A Critique.” World Development Vol.25, No.6 (1997) Robert Boyer “The Convergence Hypothesis Revisited: Globalization but Still the Century of Nations?” Suzanne Berger and Ronald Dore Eds National Diversity and Global Capitalism (Ithaca and London: Cornell University Press, 1996), pp 29-59 Week Historical Trajectory of Korean Development From liberation to the miracle to the crisis; from modernization to industrialization to a knowledge-based economy; from ISI to EOI; from periphery to semi-periphery; dynamic history of political change; punctuated equilibrium of political power; gradual evolution of economic power and institution; two faces of rapid economic growth; change of policy ideas and institutions; Chung-in Moon and Sang-young Rhyu “Overdeveloped State and the Political Economy of Development in the 1950s: A Reinterpretation.” Asian Perspective Vol.23, No.1 (1999), pp 179-203 Sungjoo Han The Failure of Democracy in South Korea (Berkeley: University of California Press, 1974) Stephan Haggard “Korea: From Import Substitution to Export-Led Growth,” Chapter Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca and London: Cornell University Press, 1990), pp 51-75 Joseph J Stern, Ji-hong Kim eds “A History of the Heavy and Chemical Industry Program,” Chapter Industrialization and the State: The Korean Heavy and Chemical Industry Drive (Boston: Harvard University Press, 1995), pp 17-38 Week Government (1): Politics and President Who actually rules and reigns-the President or the bureaucracy? How powerful is the President really? Does he have a free hand or are his hands tied? From Syngman Rhee to Roh Moo-hyun, how are their individual political power measured: please consider the following characteristics: personalized vs institutionalized; leadership style and pattern of rule: military, civilian, authoritarian, democratic and imperial; from sky high popularity to rock bottom; anomaly from the obsession with moral rule; party politics without politics; the President vs the Presidency Chung-yum Kim “Chief of Staff to President Park Chung Hee: An Unexpected Appointment” and “President Park’s Vision and Leadership.” Policymaking on the Front Lines: Memoirs of a Korean Practitioner, 1945-79 (Washington, D.C.: The World Bank, 1994), pp 65-87; pp.115123 David C Kang “Institutions: Bureaucrats and Rulers.” Chapter Crony Capitalism: Corruption and Developmentalism in South Korea and The Philippines (Cambridge: Cambridge University Press, 2002), pp 61-95 John Kie-chiang Oh “The First Military Coup and Economic Growth, 1961-1979.”Chapter Korean Politics (Ithaca and London: Cornell University Press, 1999), pp 48-97 Bruce Cumings “Korean Sun Rising: Industrialization, 1953-1996.” Chapter Korea’s Place in the Sun (New York and London: W.W Norton & Company, 1997), pp 299-336 Hyug Baeg Im “The Rise of Bureaucratic Authoritarianism in South Korea.” World Politics Vol.39, No.2 (January 1987), pp 231-257 Stephan Haggard and David Kang, “The Kim Young Sam Presidency in Comparative Perspective.” In Chung-in Moon and Jongryn Mo eds Democratization and Globalization in Korea (Seoul: Yonsei University Press, 1999), pp 111-131 Week Government (2): Bureaucracy and Industrial Policy Is the Korean bureaucracy dependent or autonomous? public servant vs bureaucracy; obstacles in the way of reform vs reform enablers; value-neutral (apolitical) vs interest oriented (political); policy ideainstitution nexus and rivalry; plan rationale vs market conforming; from monolithic to fragmented to unified institutions; EPB, MOF, and BOK; from industrial policy to competition policy; new industrial policy in a global market; democratization vs regulation Joseph J Stern, Ji-hong Kim eds “Implementation: The Role of Markets versus Commands.” Chapter Industrialization and the State: The Korean Heavy and Chemical Industry Drive (Boston: Harvard University Press, 1995), pp 39-61 Stephan Haggard and Chung-in Moon “The State, Politics, and Economic Development in Postwar South Korea.” In Hagen Koo ed State and Society in Contemporary Korea (Ithaca and London: Cornell University Press, 1993), pp 51-93 Byung-Nak Song, “Korean Economic Planning and Policy Formulation.” Chapter The Rise of the Korean Economy (Oxford and New York: Oxford University Press, 1990), pp.129-146 Seok-Jin Lew “Democratization and Government Intervention in the Economy.” In Hagen Koo ed State and Society in Contemporary Korea (Ithaca and London: Cornell University Press, 1993), pp 135-170 Hyung-Koo Lee “Economic Policy in a Time of Transition.” Chapter (Albany: SUNY Press, 1996), pp 35-63 The Korean Economy Week Civil Society: Labor, Culture and Network Why is the business-labor relationship so irrational and devoid of the rules of the game? Corporatism without labor vs conflict without contract; networks (blood, regional, school); social capital vs crony capitalism; trust (primodial, managed, contractual); Asian value & Neo-confucianism; civil society (premature vs overdeveloped); relationship between Minjung and middle class; war of maneuver vs war of position for democratic consolidation; network capitalism and government–business relations (Amakudari or parachute appointment) Yong Cheol Kim “Industrial Reform and Labor Backlash in South Korea.” Asian Survey Vol.38, No.12 (December 1998) pp 1142-1160 Hagen Koo “The State, Minjung, and the Working Class in South Korea.” In Hagen Koo ed State and Society in Contemporary Korea (Ithaca and London: Cornell University Press, 1993), pp 131162 Kyung-Ryung Seong “Civil Society and Democratic Consolidation in South Korea: Great Achievements and Remaining Problems.” In Larry Diamond and Byung-Kook Kim Eds Consolidating Democracy in South Korea (Colorado: Lynne Rienner Publishers, Inc, 2000), pp 87-109 Francis Fukuyama, “Asian Values, Korean Values, and Democratic Consolidation.” In Larry Diamond and Doh Chull Shin eds Institutional Reform and Democratic Consolidation in Korea (Stanford: Hoover Institution Press, 2000), pp 305-334 Week Business: ‘Governed Market’ and Chaebol How is the Chaebol viewed?: angel, exploiter, necessary evil; efficient market organization vs political economic hegemon; What is the history of the Chaebol?: genesis, growth and decline; What makes it run?: entrepreneurship, political assistance, and corporate life cycle; congromerate(family-owned and run, diversification etc); diversity of chaebols; from vertical symbiosis(hierarchy) to horizontal partner(network); government-business relationship (guided, governed, ungoverned); weak manager & strong owner.; political business and institutional reform Eun Mee Kim “The State and the Remaking of the Chaebol (1960s).” Chapter Big Business, Strong State (Albany: SUNY Press, 1997), pp.97-133 Inhak Hwang “Chaebol Structure, Diversification and Performance.” In Zusun Rhee and Eunmi Chang, eds., Korean Business and Management: the Reality and the Vision (New Jersey and Seoul: Hollym, 2002), pp.171-203 Karl J.Fields Enterprise and the State in Korea and Taiwan (Ithaca and London: Cornell University Press, 1995), pp.93-131 Robert Wade “Conclusions (1): Governing the Market in East Asia.” Governing the Market (Princeton: Princeton University Press, 1990), pp 297-343 Richard M Steers Made in Korea: Chung Ju Yung and the Rise of Hyundai (New York: Routledge, 1999) Giovanni Dosi, “Organizational competences, firm size, and the wealth of nations: Some comments from a comparative perspective,” in Alfres D Chandler, Jr, Franco Amatori, Takashi Hikino (eds.), Big Business and The Wealth of Nations (Cambridge: Cambridge University Press, 1997), Chapter 15 Week Foreign Investor: From Aid to Trade to Pressure Please consider the following themes: FDI(positive vs negative effects); from protection to liberalization; from positive system to negative system; FDI-aversive vs loan-oriented; techno-nationalism (rich nation, strong army); the positions and interests of foreign investors; multilateralism & bilateralism; exit vs voice; the gap between formal institutions and informal practices; sensitive and vulnerable market; external pressure and coalition building Il Sakong “International Factors in Recent Korean Development.” Chapter Korea in the World Economy (Washington, DC: IIE, 1993), pp 95-139 Peter M Beck “Foreign Direct Investment in Korea: From Exclusion to Inducement.” Asian Economic Crisis: One Year Later (Washington, DC.: KEI, Korea and the 1998), pp 221-245 Yves Tiberghien “Political Mediation of Global Financial Forces: The Politics of Structural Reforms in Japan and South Korea.” Paper prepared for presentation at the ISA meeting (New Orleans, March 2002) Robert Gilpin “The State and the Multinationals.” Chapter 11 Global Political Economy: Understanding the International Economic Order (Princeton: Princeton University Press, 2001), pp 278-304 Elke M FÖrster Protection or Liberalization?: A Policy Analysis of the Korean Beef Sector (Berlin and New York: Peter Lang, 1996) Week Mid-Term Examination Week 10 Transition (1): Democratization from Crisis of Success Key themes to consider: collapse of Yushin system; bureaucratic authoritarianism vs state corporatism; types of change (from above, below, beside); transition from failure vs success; long legacy of Park Chung Hee regime; abortive abetura and gradual transition; the third wave of democracy; transformation vs substitution; from democratic transition to democratic consolidation; stages of consolidated democracy; political background of economic crisis; political cost of undemocratic governance Hyug Baeg Im “Politics of Transition: Democratic Transition From Authoritarian Rule in South Korea.” Ph.D Dissertation (Chicago University, 1989) Chaibong Hahm and Sang-young Rhyu, “Democratic Reform and Consolidation in South Korea: The Promise of Democracy.” in Chung-in Moon and Jongryn Mo eds Democratization and Globalization in Korea (Seoul: Yonsei University Press, 1999), pp 6988 Byung-Kook Kim, “Electoral Politics and Economic Crisis, 1997-1998.” In Larry Diamond and ByungKook Kim Eds Consolidating Democracy in South Korea (Colorado: Lynne Rienner Publishers, Inc, 2000), pp 173-201 Jung-Kwan Cho “Taming the Military to Consolidate Democracy: The South Korean Experience.” Pacific Focus Vol.16, No.1 (Spring 2001), pp 117-148 Week 11 Transition (2): Globalization after Economic Crisis in 1997 What is the Crisis? - currency, financial, and economic; What are the causes of the crisis (fundamental, cyclical, contagion effect, herd behavior, lack of trust and knowledge, policy failure, conspiracy); repeated quasi-crisis and disguised blessing; recovery strategy (neoliberal vs developmental state; occidental therapy vs oriental therapy); political feasibility and consequences; economic reform in the four sectors; the problem of time and unfinished mission Joon-Ho Hahm and Frederic S Mishkin “Causes of the Korean Financial Crisis: Lessons for Policy.” NBER Working Paper No.7483 (January 2000) Ha-Joon Chang, Hong-Jae Park and Chul Gyue Yoo “Interpreting the Korean Crisis: Financial Liberalization, Industrial Policy and Corporate Governance,”Cambridge Journal of Economics, No.22 (1998), pp 735-746 John A Mathews “Fashioning a New Korean Model Out of the Crisis: The Rebuilding ofInstitutional Capabilities.” Cambridge Journal of Economics, No.22 (1998), pp 747-759 Choong Yong Ahn “Financial and Corporate Sector Restructuring in Accomplishments and Unfinished Agenda.” The Japanese Economic Review South Korea: Vol.52, No.4 (December 2001), pp 452-470 Week 12 Korean Reform: Decoding the ‘Black Box’ of Reform Please consider the following key themes: confronting strategies (simultaneous development of democracy and market economy vs democratic market economy); pro-reform coalition vs anti-reform coalition; nationalist vs internationalist; political, economic and cultural reform; path-dependence and institutional complementarity; designing, implementing and evaluating reform; sequence and priority of reform agenda; external vs internal pressure; structural vs policy pressure; between globalization and domestic politics; between efficiency and equity; convergence vs divergence of reform interest; the winners vs losers; intended objective vs unintended consequences Geoffrey Garrett and Peter Lange “Internationalization, Institutions, and Political Change.” In Robert O Keohane and Helen V Milner Eds Internationalization and Domestic Politics (Cambridge: Cambridge University Press, 1996), pp 48-75 Chung-in Moon, “Democratization and Globalization as Ideological and Political Foundations of Economic Policy.” Jongryn Mo and Chung-in Moon eds Democracy and the Korean Economy (Stanford: Hoover Institution Press, 1999), pp 1-33 Mark Andrew Abdollahian, Jacek Kugler, and Hilton L Root “Economic Crisis and the Future of Oligarchy.” In Larry Diamond and Doh Chull Shin eds Institutional Reform and Democratic Consolidation in Korea (Stanford: Hoover Institution Press, 2000), pp 199-231 Jongryn Mo “Political Culture and Legislative Gridlock: Politics of Economic Reform in Precrisis Korea.” Comparative Political Studies, Vol.34, No.5 (June 2001), pp 467-492 Cung-In Moon and Sang-Young Rhyu “The State, Structural Rigidity, and the End of Asian Capitalism: A Comparative Study of Japan and South Korea.” In Richard Robison, Hyuk-Rae Kim, Politics and Markets in the Wake of the Asian Crisis (New York: Routledge, 2000), pp 77-98 Week 13 Case Study (1): Samsung vs Daewoo Please examine the following aspects for the case study: success story (Samsung) vs failure story (Daewoo); similarity & difference; paradox of government-Chaebol relationship (more protected, more fragile); government role (insurer, regulator, monitor, umpire); corporate strategy; corporate governance; from learning to innovation; core competence; restructuring strategy (choice and concentration vs too big to fail); social behavior (apolitical, nonpolitical, and political); ideology of Chaebol (territorial vs internationalist); increasing concentration after Chaebol reform; flow of information and policy discourse Youngil Lim “Corporate Organization as a Learning Institution.” Chapter Technology and Productivity: The Korean Way of Learning and Catching Up (Cambridge: The MIT Press, 1999), pp 89-125 Sung-Hee Jwa “Globalization and the Diversification Behavior of the Chaebols.” Chapter A New Paradigm for Korea’s Economic Development: From Government Control to Market Economy (New York: Palgrave, 2001), pp 114-126 Vladimir Pucik and Jun-Cheol Lim “Transforming Human Resource Management in a Korean Chaebol: A Case Study of Samsung.” In Chris Rowley, Tae-Won Sohn, and Johngseok Bae eds Managing Korean Business (London: Anthony Rowe Ltd., 2002), pp 137-160 “Kim’s Fall from Grace.” Business Week (February 19, 2001) “Samsung.” Business Week (December 20, 2001); Newsweek (November 20, 2003) Samsung Annual Report (http://www.samsung.com) Week 14 Case Study (2): POSCO vs The Korea Development Bank Please examine the following aspects for the case study: SOEs in manufacturing and financial sector; POSCO(neither miracle nor irony) vs KDB(unending government intervention, Kwanchi); from genesis to growth; public vs private goods; political pressure & parachute appointment; international vs domestic competition; privatization before and after; variations of government-business relationship; company within a market vs state within a state; pressure from foreign capital; corporate governance reform in the process of privatization Alice H Amsden “The Triumph of Steel.” Chapter 12 Asia’s Next Giant: South Korea and Late Industrialization (New York and Oxford: Oxford University Press, 1989), pp 291-318 Yung-Ho Cho and Jeongkoo Yoon “The Origin and Function of Dynamic Collectivism: An Analysis of Korean Corporate Culture.” In Chris Rowley, Tae-Won Sohn, and Johngseok Bae eds Managing Korean Business (London: Anthony Rowe Ltd., 2002), pp 137-160 William T Hogan The POSCO Strategy: A Blueprint for World Steel’s Future (Maryland: Lexington Books, 2001) POSCO’s Homepage (http://www.posco.co.kr) The Korea Development Bank’s homepage (http://www.kdb.co.kr) Week 15 Conclusion and Wrap-Up: Newly Emerging Debates Who monitors the monitor? What is, if any, the new social partnership(?); Consider the following dynamics: small but strong economy vs middle power; organizational convergence of Chaebols and venture firms; future of transitional paradox; convergence revisited(complete vs limited); consolidating democracy & sustaining economic growth; between growth and welfare; e-economy and institutional change; globalization vs national sovereignty; macro-economy & micro- politics; East Asian business hub; is there a new Korean model(?) Hagen Koo “The Working Class at the Crossroads.” Chapter Korean Workers: The Culture and Politics of Class Formation (Ithaca and London: Cornell University Press, 2001), pp 188-217 Chung-In Moon and Sang-Young Rhyu, “No More Military Intervention? Recasting and Forecasting Military Politics in South Korea.” Harvard Asia Quarterly Vol.6, No.4 (Autumn 2002), pp 413 Ha-Joon Chang and Hong-Jae Park, “An Alternative Perspective on Government the Chaebol in Korea: Industrial Policy, Financial Regulation, Policy towards and Political Democrac y,” Sung-Hee Jwa and In Kwon Lee eds., Korean Chaebol in Transition: Road Ahead a Agenda (Seoul: Korea Economic nd Research Institute, 2000), pp 83-147 Mauro F Guillén “On Globalization, Convergence, and Diversity.” The Limits of Convergence (Princeton: Princeton University Press, 2001), pp 213-233 John Toye, “Changing Perspectives in Development Economics,” Ha-joon Chang (2004), pp.21-40 Week 16 Final Examination 10 ... dynamic history of political change; punctuated equilibrium of political power; gradual evolution of economic power and institution; two faces of rapid economic growth; change of policy ideas... democratic consolidation; stages of consolidated democracy; political background of economic crisis; political cost of undemocratic governance Hyug Baeg Im “Politics of Transition: Democratic Transition... 2000) John Lie Han Unbound: The Political Economy of South Korea (Stanford: Stanford University Press, 1998) Jongryn Mo and Chung-in Moon eds Democracy and the Korean Economy (Stanford: Hoover Institution