Institutions, Interests, and the Post-IMF Structural Adjustments in Korea

Abstract

The role of the Korean state in structural adjustments after the economic crisis of 1997 has not been much different from the economic management style of the developmental state in the past. The state's intervention in structural adjustments of the corporate and financial sectors after the currency crisis relied on the conventional approaches of the developmental state. Compared to other countries that went through similar currency crises, Korea has efficiently performed structural adjustments. The main reasons to make structural adjustments effective include the IMF's coercive institutional isomorphism toward market economy. The high autonomy and policy capabilities that the Korean state enjoys also have supported its comparative success in structural adjustments. Such a high level of state autonomy and capability has been basically supported from the Korean people on the government's economic reform ropulsion in face of the recent economic crisis. The Korean state's institutional structure including the economic policy apparatus as pilot agencies and the existence of the economic technocrats with decades' experience of mercantilism also contibuted to the persistence of the developmental state. And the structural adjustments conducted by the developmental state were a rational choice of major stakeholders trying to improve their individual welfare in the political market.

Institutional Change and Economic Growth in East Asia after the Asian Financial Crisis, 1997-98

“…After the crisis, many East Asian countries, especially the countries the IMF intervened in, established laws that enhanced corporate governance, supervisory regulation of the banks, regulation of chaebols, and foreign investment laws (Lee, 2000;Haggard, 2001;Yanagimachi, 2004), but such policies have not necessarily been enforced. Y. D. Jung (2001) notes that despite reforms made as a condition of receiving aid from the IMF, the South Korean strategy and finance ministry remains at the center of national development because its influence in organizational culture and personal relationships runs deep. It is possible that immediately after the crisis, chaebols and the members of the strategy and finance ministry may have felt pressure to abide by the reforms, which called for greater autonomy of the central banks.…”