THE POSTDEVELOPMENTAL STATE: THE RECONFIGURATION OF POLITICAL SPACE AND THE POLITICS OF ECONOMIC REFORM IN SOUTH KOREA by Jamie Doucette A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Doctor of Philosophy in The Faculty of Graduate Studies (Geography) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) December 2009 © Jamie Doucette 2009 ii Abstract In this dissertation I examine the restructuring of the South Korean developmental state from a strategic-relational perspective sensitive to how the intersection between democratization and neoliberalization has influenced economic reform. In contrast to conventional approaches to developmental states that stress the autonomy of state from society and limit the contingency of social forces seen as affecting developmental strategies, I argue that it is within the reconfigured political space created by democratization, and shaped by the demands of the reform bloc of liberal and progressive forces that effected the democratic transition, that developmental state reform must be situated. This historic bloc has constituted a key support base for reform-oriented governments of Kim Dae Jung and Roh Moo Hyun and supplied these governments with key advisors and politicians. However, under these governments, neoliberal policies have expanded, undermining the hegemony of reform governments and leading to debates within the reform bloc over the character of Korean democratization, and the assertion that substantive, egalitarian demands have been neglected. I examine this assertion through an exploration of relations of coordination and conflict within the integral state (of political society and civil society) around efforts to reform the financial policies of the developmental state, to create institutions of social cooperation, to regulate foreign migrant labour, and to promote economic engagement with North Korea. In each of these case studies I outline areas where demands for economic and social justice have been subordinated to demands for national reunification and neoliberal reform and point to some of the wider implications this process holds for the reform movements and for the politics of democratization. To conclude, I survey some of the more recent transformations of the reform bloc under the conservative government of Lee Myung Bak and point to areas of continued tension that reveal that many of the dilemmas of developmental state reform described in this dissertation continue to persist. These dilemmas constitute a strategic political space that democratic reform projects will have to continue to work through if a substantive alternative to the predicaments of the postdevelopmental state is to be found. iii TABLE OF CONTENTS Abstract .......................................................................................................................... ii Table of Contents........................................................................................................... iii List of Tables ................................................................................................................ iv List of Figures................................................................................................................ v List of Illustrations........................................................................................................ vi List of Acronyms ......................................................................................................... vii Acknowledgements ..................................................................................................... viii Preface: The Integral State as Social Space................................................................. 1 Chapter 1: The Postdevelopmental State: The Long Decade of Economic Reform and the Reconfiguration of Civil Society ............................................................................ 19 Chapter 2: The State as Phantom Intentionality ........................................................... 58 Chapter 3: The Rise of Postdevelopmental Finance ..................................................... 87 Chapter 4: The Politics of Participation .................................................................... 123 Chapter 5: The Failure of Social Cooperation............................................................ 159 Chapter 6: The Limits of Representation: Migrants, Minjung and the Challenge of Irregular work ........................................................................................................... 190 Chapter 7: Zone of Confusion: The Kaesong Industrial Complex and the Politics of Postdevelopmental Zoning ......................................................................................... 239 Chapter 8: Conclusion: The Politics of Conjuncture ................................................. 274 References ................................................................................................................. 290 Appendix 1 ................................................................................................................ 316 Appendix 2 ................................................................................................................ 321 Appendix 3 ................................................................................................................ 322 Appendix 4 ................................................................................................................. 323 Appendix 5 ................................................................................................................. 324 Appendix 6 ................................................................................................................. 325 iv List of Tables Table 3.1 The Restructuring of Korean Finance From a Transnational Perspective..112 Table 4.1 South Korean Elite: Educational Backgrounds.........................................144 Table 5.1 Union Membership by Business Size (as of 2005-end).............................167 Table 5.2 Labour’s Spatial Fix: Developmental and Post-developmental Regimes .169 Table 5.3 Tripartite negotiations in South Korea .....................................................182 Table 5.4 Monetary Amounts of Pending Damage Claims and Provisional Seizure of Assets as of January 2004 ...................................................................187 Table 7.1 Experiments in Postdevelopmental Zoning ..............................................253 v List of Figures Figure 3.1 Growth Rates: Manufacturing (1971-1984) ................................................ 94 Figure 3.2 Growth Rates: Manufacturing (1992-2007) ............................................... 101 Figure 3.3 Export and GDP Growth (1971-2007) ....................................................... 103 Figure 3.4 Debt ratios: Manufacturing (1971-2007).................................................... 109 Figure 3.5 Ratios of Profit to Sales in Korea Manufacturing Firms (1971-2007)......... 115 Figure 3.6 Rate of Profit in Manufacturing and Finance (1970-2002) ......................... 116 Figure 3.7 Debt to Equity: Manufacturing (1971-2007) .............................................. 117 Figure 3.8 Labour Costs and Productivity: Manufacturing (2001-2007)...................... 119 Figure 4.1 Intra-group Shareholding in the Samsung Group ....................................... 142 Figure 4.2 Social Expenditure and Taxes on Income and Profit (1996-2008).............. 148 Figure 6.1 Non-Regular Workers as Percentage of Total Wage and Salary Workers (1995-2007) ......................................................................................... 201 Figure 6.2 The Gendering of Non-Regular Work (1995-2007) ................................... 202 vi List of Illustrations Illustration 6.1 ETU-MB Members Attending a Labor Rally, 2003 ............................. 222 Illustration 6.2 ETU-MB Members After Head Shaving Ceremony, 2004 ................... 223 Illustration 6.3 Suicide Protest Performance ................................................................ 230 Illustration 6.4 Minjung Funeral Procession ................................................................ 234 Illustration 6.5 ETU-MB Commoration Protest Against Immigration Crackdown, November 2003 ............................................................................... 235 Illustration 7.1. A Portrait at the Hyundai Asan KIC Office Pictures Kim Jong Il with Hyundai Founder Chung Ju Yeong and Son........................................ 260 Illustration 7.2 Screen Shot of Flash Advertisement for the KIC From the Hankyoreh’s English Edition................................................................................... 264 Illustration 7.3 Garment Factory in KIC ...................................................................... 270 vii List of Acronyms BIS Bank of International Settlements BOK Bank of Korea CCEJ Citizen’s Coalition for Economic Justice CGCG Center for Good Corporate Governance DP Democratic Party DLP Democratic Labour Party EPS Employment Permit System ETU-MB Equality Trade Union – Migrant’s Branch FKI Federation of Korean Industries FKTU Federation of Korean Trade Unions GNP Grand National Party IMF International Monetary Fund IOM International Organization on Migration ITS Industrial Trainee System JCMK Joint Committee for Migrants in Korea KCCM Korean Council of Citizen’s Movements KCTU Korean Confederation of Democratic Trade Unions KFEM Korean Federation for Environmental Movement KIC Kaesong Industrial Complex KLI Korean Labour Institute KNSO Korean National Statistical Organization KPSU Korean Public Servants Union KTC Korean Tripartite Commission KWAU Korean Women’s Associations United KWWA Korean Women Worker’s Associations KWTU Korean Women’s Trade Union MDP Millennium Democratic Party MOFE Ministry of Finance and Economy MTU Migrant Trade Union NBFI Non-Bank Financial Institutions NHRC National Human Rights Commission NL National Liberation OECD Organization for Economic Cooperation and Development PD People’s Democracy POSCO Pohang Steel Corporation PSPD People’s Solidarity for Participatory Democracy PSSP People’s Solidarity for Social Progress PWC Power of the Working Class SER Solidarity for Economic Reform STEPI Science and Technology Policy Institute UN United Nations UNDP United New Democratic Party (later DP) viii Acknowledgements This dissertation is an attempt to grasp some particular regions of economic reform (finance and labour in particular) and situate them within a broader political sequence, democratization and the articulation of an egalitarian politics, initiated by reform forces in South Korea. As such, it is generally occupied with a strategic understanding of social space, and within a region of structure produced between state and civil society by reform forces. This is not the only region of social space in which to locate politics, but for better or for worse it was the one that I chose to situate this study, for reasons identified in the preface. Identifying and studying this political sequence and some of the events, alliances, and fidelities that structure it would not have been possible, however, without a particular academic sequence whose collective imprint needs to be acknowledged. I’ll try to do this briefly, with the caveat that there will be names that will be inevitably glossed over here. As in research as in life, it is often difficult to name the full set of relations conditioning any social phenomena, and often only a very general outline can be produced. First off, the faculty here at UBC and elsewhere that nudged me along through various supervisory committees and spring reviews include Elvin Wyly, Juanita Sundberg, Dan Hiebert, Geraldine Pratt and Aihwa Ong. The supervision of Jim Glassman needs to be mentioned here as well; without his patience, mutual interests, and resourceful understanding of social theory and political economy I don’t think I would have been able to cast my analytic net so widely. I began this degree with a series of internal questions involving political economic practice that I was determined to answer in some form. Not all of the answers are in this final written work, but I feel that I better ix understand the politics of a particular site of intervention and of some of the academic politics of investigating it much better than I would without his help. As an undergraduate, the mentorship of guidance of Blanca Muratorio, Julie Cruikshank, Jean Lave, Gillian Hart were also essential for encouraging my curiosity. However, it was probably Allan Pred more than anyone who taught me the ethics of scholarship and helped me develop an interest in geography (as a condition rather than a discipline). Allan always stressed education above degree or disciplinary concerns. Allowing me to complete an undergraduate thesis with him as a non-geography student (and one on exchange at that!) is a perfect example of his generosity, inquisitiveness, and engagement; he is surely missed. My cohort here at UBC should also be mentioned, they have been an important source of support; especially Bjoern Surborg, Pablo Mendez, Kathryn Furlong, Joanna Reid, Adrienne Smith, Sara Koopman, Heather Frost, Deborah Watt, Mona Atia, Eric Olund and Kevin Gould. A different source of inspiration for me has been the intellectual debates and democratic commitments of activists from South Korea’s social movements. From them I’ve learned a lot about more about democratization and social struggle than any textbook, and this has provided a valuable contrast to the activism of the social movements I’ve been involved with in North America -- not better or worse, just different. The tensions between these contexts has informed my own thinking about political space more than anything else, allowing me to see the democratic potential of particular policy areas that I did not think possible. They have also helped me understand that the politics of participation, whether it involves state policy or grassroots struggle, is x always a question that one always has to think through, whether or not they identify with a particular form of movement or space of political opportunity. Cho Hee Yeon, Baik Tae Ung, and Hur Seong Woo have been especially important here in helping me to work through this inference; all are excellent examples of engaged intellectuals.1 As have been all the other students and faculty I met at the Democracy and Social Movements Institute at Sungkonghoe University, where I carried out my research. Song Yong Han, Kim Mun Gab, Lee Seonok and Rebecca Kim were especially important here, and I could not have carried out research without their help and friendship. In addition, during my year I met three other foreign researchers, Christina Moon, Dan Bousfield, Susan Kang whose friendship and intellectual commitments left a mark a mark on my own research. We also shared the pleasure of hot mushroom soup and more than a few late nights of drinking and conversation. Also in Korea, members of our ad- hoc “reading group on critical geographic thoughts” were a source of inspiration and professional kinship: Bae Gyoon Park, Dougless Gress, Hyun Joo Jung, Sook Jin Kim, and Young Jin Choi need to mentioned here. They provided me with a welcome disciplinary home away from home and I look forward to continued engagement with them in the future. My friend, old and new, with the Migrant Trade Union and Migrant Worker Television also need to be mentioned. Most of them have now been deported and are going about their lives back in Nepal, Bangladesh, Canada and elsewhere: Masum Moniruzzaman, Mahbub Alam, Kabir Uddin, Nancy Hayne, Mi Young Lee, Devon Ayers, Christian Karl are all important here. Conversations about financial policy with 1 As a rule, Korean last names precede the first name, and I adhere to this in this dissertation except in cases of Korean American scholars or Korean scholars educated in the West that either use a Western name or prefer to invert the order. xi Hyoung Joon Park, Loren Goldner, Jang Jin Ho, and Bongman Seo also helped me progress in my research. Owen Miller, Kevin Gray, and Park Mi, who share similar interests in Korean social movements, should also be mentioned. When I wasn’t doing research my old and new friends from South Korea’s Microwiev, a now defunct art collective/ loose grouping of artists and intellectuals, provided me with humor, stimulation, friendship and some of the best potato pancakes I’ve ever had. Yoo Byoung Seo (my oldest friend in Korea), JJ, Chang Chang, Irang, Han Pat, and Anne are important to mention here. My roommates Stephanie Kress, Kang Kumman and Kim Jinna should also thanked for the comfort and friendship they provided during my year of research. Closer to home, since I’ve returned to Vancouver, Rex Bailey, Justin Choi, Tasha Riley, Kristina Lee Podevswa, Alan McConchie, and Karen Lai have all provided intellectual support and friendship in their own way. There are probably many others I should thank, but I’ll stop here. However, no list of acknowledgements would be complete without thanking my wife Tiffany, who perhaps needs to be acknowledged most of all. Without her support, patience, understanding, humor, and similar passion for social justice, this dissertation would have never been completed. 1 Preface: The Integral State as Social Space History is the subject of a structure whose site is not homogeneous, empty time, but time filled by the presence of the now… To articulate the past historically does not mean to recognize it “the way it really was.” It means to seize hold of a memory as it flashes up at a moment of danger… For every image of the past that is not recognized by the present as one of its own concerns threatens to disappear irretrievably… Historicism gives the “eternal” image of the past; historical materialism supplies a unique experience with the past. Walter Benjamin, Theses on the Philosophy of History (1969, 261, 255, 263). If geography, like Benjamin’s idea of history, is a discipline that interprets space and time in order to intervene in the present, then it is shaped by a strategic tension between past events and a present predicaments; as such, it produces geographies that supply a unique experience with past time and space, and attempts to show how present strategic problems are informed by trajectories emerging out of past events, or spatio-temporal moments. The same might be said of this dissertation, which is concerned with showing how past events have reconfigured political space in South Korea, and how this reconfiguration informs strategic dilemmas in the present. Before this present can be examined, however, it is first necessary to situate how this dissertation came to be constructed within a particular social space. The purpose here is to situate an intellectual production by revealing some of the particular historical and biographical events that inform both the strategic moment that it seeks to understand, as well as the theoretical perspectives necessary to undertake such an inquiry. This dissertation started with a series of questions I began to ask myself after I arrived in South Korea in the summer of 2001. I had been active at the time in what came to be termed the global justice or alter-globalization movement – this was also regarded sometimes as the anti-globalization movement, a term for an assemblage of different 2 movements with which I have never been quite comfortable. My personal participation in this movement began with the protests surrounding the 1997 APEC summit in Vancouver, Canada and continued through the long public inquiry into the policing of that event to the Seattle protests in 1999 and the Summit of Americas in Quebec City in the spring of 2001, shortly after which I left for Korea to work and pay back my student loans. Upon arrival, I became quickly immersed in a loose grouping of young, like- minded Korean and foreign migrant activists who were involved in a variety of similar social movements. Some were conscientious objectors; others were involved in grassroots media and solidarity campaigns with the then emergent migrant trade union movement. For the two years that I stayed in Korea before returning to Canada for graduate school I was able to observe some of the campaigns and organizational climates of these social movements and I was impressed by their often-difficult struggles. I wanted to learn about the context in which they had arisen, and I was also curious as to why these social movements seemed to be more active and popular than movements back home; especially since the North American anti-globalization movement began to slowly demobilize following the September 11 events. The answer, it seemed to me, had a lot to do with the sense of political opportunity afforded by the recent transition to democracy and the potential for the complex of relations between the state and society to be affected by social movement mobilization. As the December 2002 presidential elections approached, I witnessed a tangible excitement among my progressive friends about the presidential candidacy of Roh Moo Hyun, a former human rights lawyer. Much of the radical anti-globalization movement at that time was thoroughly absorbed in the debates about horizontal, networked-forms of 3 grassroots mobilization and was sceptical about the ability of institutionalized politics of Western political parties, trade unions, and mainstream NGOs like the Sierra Club and Make Poverty History to challenge the inequalities produced by global capitalism (cf. Harvie et al 2006). However, in South Korea, progressives felt that Roh’s victory in the election might help to create a substantial alternative to the neoliberal economic policies of previous reform governments and deepen the participation of social movements in reforming government policy in a substantive manner. Roh’s government included not just prominent democracy activists but over a hundred former members of the more mass movement-oriented NGO People’s Solidarity for Participatory Democracy (PSPD). Even my more sceptical friends supported Roh in some measure and much of this good will could be felt during his first two years in office. During the impeachment proceedings by conservative forces against Roh in 2004, even marginalized social movements such as the Migrant Trade Union (which had been targeted by the government in an ongoing immigration crackdown, see chapter 6) joined in anti-impeachment protests organized to keep Roh in office. Although Roh continued the long trajectory of democratic reform initiated by the democracy movement of the 1980s, reforming state policies in regards to human rights and social welfare, this sense of potential did not last. As I shall argue in this dissertation, this was largely because the Roh government was not able to institutionalize a more egalitarian framework for political economic restructuring. Instead, he continued with the neoliberal reforms of previous governments in the midst of expanding socio- 4 economic inequality.2 This problem was informed by and contributed to the fragmentation of the reform bloc of progressive social movements, NGOs, reformers, and other forces that had supported the president in the 2002 elections. Much of this fragmentation had to do with the politics of economic equality and the lack of substantive policies aimed at meliorating economic inequality as well as effective labour movement participation in economic reform projects. This is not to say that the reform governments of Roh Moo Hyun (2003-2008) and Kim Dae Jung’s government (1998-2003) do not stand out in marked contrast to the authoritarian regimes of Park Chung Hee (1961-1979) and Chun Doo Hwan (1980-1987), and the transitional conservative regimes of Roh Tae Woo (1987-1993) and Kim Young Sam (1993-1998) that followed them. Rather, my argument is simply that reform governments have failed to remain hegemonic because they have embraced neoliberal economic reform, slowly undermining the wide popular support that brought them to power. This failure has created challenges for progressive politics, and, as such, constitutes a strategic and relational problem that provides a point of departure for understanding the politics of economic reform in South Korea. After my initial two years in Korea, I felt I needed to get a better understanding of the unique role of the Korean state in the economy in order to understand why it was the national state that was the target of much reform activism and to get a sense of how and why the Korean economy proved so difficult for reformers to reorient along a more egalitarian path. These questions first led me to the literature on the developmental state in order to understand how the assemblage of Korean political economy worked and had 2 By 2005, the income of the top 10 percent of the population was over 9 times higher than the income of the bottom 10 percent. Whereas before the 1997 crisis it had only stood near 6/1 (Sung and Young 2007, 5). This ratio has continued to increase since 2005 to near 14/1 in 2007 (cf. Monthly Public Finance Forum 2008, 21). 5 developed. I found that the strength of this literature was the sense of the contingency – compared to neoliberal accounts – it offered to Korea’s trajectory of economic development. The Korean national state had played a strong role in economic growth through heterodox policies that would now fall outside of the neoliberal norms being imposed by the IMF and other international institutions. It was understandable why anti- globalization movements, as well as economic nationalists or other forces advocating for stronger state sovereignty over the economy, would try to protect these policies, but reform governments in Korea had set about dismantling them. I soon found that this literature was not enough for understanding why the developmental state had been targeted for economic reform. Beyond the strategic control of finance and industrial capital, developmental state theorists had relatively little to say about the position of labour within the model and their analyses generally ignored civil society and the social movements that had led to democratization.3 Developmental state theorists seemed to be merely arguing that the state could internalize certain functions of capitalist development usually associated with the market. Thus, very little could be said about how development comes to be valued and accessed by different actors or the conflicts that result because of it. I struggled to figure out how I could bring a focus on how the institutions of the developmental state had changed into tension with a strategic understanding of the role social movements have played in the democratization process. 3 This is a problem that is not isolated to developmental state theory but informs much of the conventional international relations literature, which tends to be methodologically territorialist (Rosenburg 2000, 9, 30-32), attributing imputed characteristics to different forms of states, without, necessarily carrying out a very substantive analysis of the social forces constituting various social configurations of state power. 6 This problem led me to search for a theoretical approach to development and restructuring that could examine the role of the state without ignoring civil society and the way in which democratic demands had been articulated by reform forces, which in turn led me back to the work of Antonio Gramsci and the way in which he held the state and civil society in a complex tension with each other. Gramsci was careful to characterise what he called the “extended” or “integral” state as an assemblage of both state and civil society, or civil society + political society. Reading Gramsci in Seoul and among the dense networks of the historic reform bloc enabled me to treat economic reform as a strategic issue of coordination and conflict between reform movements and reform governments. Gramsci was much more sensitive to how the role of the state in the economy is shaped by the relations within the integral state and, as a consequence, through democratic struggle. I came to see the problem of developmental state reform as a result not simply of the different roles assigned to the state in the development of the Korean economy but also of the historical experience of democratization and the different power relations between reform forces in that process. Especially important here was the fusion of both liberal and progressive forces4 that had pushed for democratization and supported reform governments since 1987. This liberal-progressive reform bloc had begun to occupy a hegemonic position during the reform governments but they had failed to achieve a more lasting hegemony, precisely because they were not able to institutionalize a broader basis for social solidarity as they set about restructuring the developmental state. Instead, they turned toward neoliberal reform, albeit tempered with 4 In South Korea the term “progressive” (Jinbo) is often used to denote political positions that might be better termed as “left” in Europe and North America. The terms liberal-left and liberal-progressive bloc should be regarded as synonymous in this dissertation. 7 liberal, procedural reforms as well as some advances towards welfare provision. This neoliberal trajectory created tensions within the reform bloc and led to a more acute fragmentation by the time of 2007 presidential elections. I wanted to understand why this had been so. Why had neoliberal reform been embraced by components of the reform bloc and what did this mean for broader social struggles? When compared to the current conservative regime these questions may seem insignificant; however, the failure to achieve a more lasting alliance politics within the liberal-progressive bloc and to complete a more thoroughgoing reform of the state is what in many ways led to the re- emergence of a conservative administration. Therefore, situating the problem of developmental state reform as a relational problem involving state and civil society, within a Gramscian perspective, is an excellent way to get at some of the contradictions unleashed by democratization and economic reform. When I began my research, this inference was still at a largely intuitive level, and I was not sure how I would be able to move beyond institutional changes brought about by developmental reform and focus in on a particular sets of conflicts between reform forces. Thankfully, an opportunity to conduct my research from the Democracy and Social Movements Institute at Sungkonghoe University allowed me to explore the changing nexus between state and civil society in greater detail. Sungkonghoe is something of a Korean version of New School for Social Research. It is a very small school but has a strong influence in domestic debates about progressive issues. The school itself played an important role in the democracy movement and many key reformers and intellectuals continue to teach there. My research fellowship there proved fortuitous for understanding some of the tensions within the reform bloc and internal 8 problems of the Roh regime in creating alternatives to neoliberalism. It also helped me understand some of the particular characteristics of the varieties of neoliberalism adopted by the Roh regime through contact with some of the reformers in that regime as well as other social movements. These insights became all the more relevant when Roh Moo Hyun’s “participatory government” began to dissolve in the lead-up to the December 2007 presidential election due to the internal tensions and disputes circulating within the liberal-progressive bloc. After my year at Sungkonghoe, I came to realize that I could not have undertaken my research in the absence of the social space created by democratization and that this space itself had provided the site of most of my empirical observations, not to mention the initial condition of possibility for this dissertation. This space seemed all the more relevant because it was the failure to resolve some of tensions within it that had led to the diminished capacity of the Roh administration to pursue substantive economic reform. Even though Roh had labelled his regime the “participatory government,” the participation of a variety of social movement groups became subordinated to a larger trajectory of neoliberal reform, which led to division among reformers. This problem was not simply due to the fact that Roh had embraced neoliberal reform, but that such divisions spoke to the fusion of liberal and progressive forces within the reform bloc that was the result of the mobilizations for democracy and the need to counterbalance conservative forces in the National Assembly. While on the one hand, the procedural reforms that liberal reformers have strengthened calls for greater economic justice, and provided a new juridical basis for addressing past injustices, the lack of a larger push for economic democracy has eroded the reform bloc’s political unity. At the heart of these 9 problems seemed to me to be both a problem of ideological articulation – the ability to put forth an alternative to neoliberalism and to articulate it with the central democratic demands for reunification and egalitarian reform that have animated this bloc – and of political coordination – the need for a more open participatory framework that could effectively reorient the trajectory of state policy in a substantive direction by institutionalizing social solidarity. Finally, I felt that such an analysis of reform politics would also be appealing to other scholars, reformers and social movements examining similar contexts where reform governments had taken power but have faced difficulties in expanding political and socio-economic equality. Focusing on problems within the social space created by democratization and involved in economic reform also raised several problems.5 As a social space, the integral 5 Ross (1988, 9) argues that the Henri Lefebvre’s concept of social space (1991, see below) – which depicts social space as a space of relations rather than as a static domain - - is a recoding of Lefebvre’s earlier conception of everyday life in order to provide an alternative to phenomenological and structural explanations of space, getting beyond a merely discursive or abstract understanding of space, and to draw attention to lived practices through which space is produced. While Lefebvre regarded his earlier concept of everyday life as that which remains after all specialized activities have been subtracted from it, his later conception of social space is more open, and includes an understanding of how specialized activities, especially abstract conceptions of space, are constructed through everyday spatial practices. Political space, then, can be thought of as a regional configuration of social space. While political space may be interpreted as both as a discursive, and specialized region, involved in the ideological and institutional configuration of the state and politics, understanding it as a social space in the Lefebvrian sense opens up political analysis to the multiple everyday practices behind political discourses and institutional configuration. In other words, approaching politics as political space involves situating it within the more everyday practices of coordination, conflict, articulation, education, protest and participation that shape politics, rather than positing static ideal types. In this way, Lefebvre’s understanding of social space can be though of as a critique of both static understandings of the state in the Hobbesian, Lockean, and even orthodox Marxian traditions as well as poststructuralist and other conceptions of the state which focus too closely on the juridical configuration of the state rather than on the everyday relations which condition and produce distinctions between 10 state is primarily a relational space: a space of historical experience in which multiple actors respond to social processes occurring through a wide range of scales and sites. Unlike place, it seems much harder to treat the integral state as a distinct territoriality, and yet it is involved in helping to produce the territorializing effects of political and economic policy, and thus some of the frameworks through which places are constructed and integrated into larger assemblages of power relations. Thus, studying the integral state as an open-ended social space caused me some anxiety, as there is no a priori territoriality to start from, but only multiple sets of relationships that seem to inform the configuration of state and civil society. While these relationships are often domestically located, it would be wrong to consider them solely as constructed within national space. No place exists outside the multiple relations which condition it, and it is important to understand how even domestically located social movements and government policies have important transnational and translocal dimensions. A second, theoretical, anxiety also emerged, involving the methods through which hegemony has been examined in contemporary social theory and the need for a way to account for both the discursive and extra-discursive character of hegemonic articulation. Ernesto Laclau, for example, argues that hegemonic projects, especially democratic ones, can be thought of as attempts to give a name to the contingency, and thus also the indeterminate nature or void (Laclau, 2004), of the social itself. Hegemony is an act of nomination, a naming of contingent power relations that is thus always necessarily incomplete, as no project can name (or negate) the full set of power relations. Hegemonic processes are always necessarily expressive projects that attempt to state and society (see below and Chapters 1 and 2 for a fuller discussion of social space and state theory). 11 incorporate new demands and rearticulate them within a ruling bloc, and this requires that emancipatory social movements attempt to articulate different social struggles together in order to hegemonize them. While I generally agree with this theory, Laclau’s approach to the theory of hegemony is situated largely in the field of linguistic and discursive theory. For Laclau, linguistic and discursive ontologies are seen as the necessary methods not only for grasping the logic of hegemony, and the way in which various sets of power relations are discursively articulated together in hegemonic practices, but also the nature of objectivity as such (Laclau 2004, 136-137).6 Boucher (2008) argues that this is a critical error for Laclau, as it collapses a theory of a social formation into a discursive- linguistic theory (cf. Hart, 2002). The relationality between different regions of structures that might determine parts of a social formation (such as the relation between historic 6 Following Boucher (2008), my point here is simply that the location of ontology, and hence objectivity, with linguistic ontology has consequences for how one locates the materiality of social struggle. Laclau contrasts his own perspective with that of Alain Badiou’s mathematics-based (meta)ontology, which is based largely on set theory. “Is there a field that is more primary than that uncovered by set theory which would allow us properly to account ontologically for the type of relations that we are exploring? I think there is, and it is linguistics. The relations of analogy through which the aggregation constructing an evental site are established are relations of substitution, and the differential relations constituting the area of objective distinctions (which define the ‘situation’, in Badiou’s terms) compose the field of combinations. Now, substitutions and combinations are the only possible forms of objectivity in a Saussurean universe, and if they are extracted from their anchorage in speech and writing – that is, if the separation of form from substance is made in a more consequent and radical way than Saussure’s – we are not in the field of a regional but of a general or fundamental ontology (Laclau 2004, 151).” The point here is that while Badiou uses set theory to elaborate the objectivity of events and how they change hegemony, Laclau seems to creating a grey area between linguists as a meta-ontology that can be used to better understand hegemony and linguistics as a fundamental ontology on which hegemony is based. The risk here, of course, is that of reducing hegemony to a discursive function, evacuating the study of everyday life, structures of feeling, and political economic processes – all of which have distinct materialities – from hegemonic negotiation. 12 blocs and trajectories of capital accumulation), as well as the relation between materiality and discursivity, are obscured. [T]he postmarxian version of “complexity” is a horizontal proliferation of hegemonic centres, which amounts to the multiplication of simple political antagonisms and not the complexity of an overdetermined social contradiction. While Laclau and Mouffe affirm the existence of the external world and the materiality of discourse, they claim that the being of every object is discursively constructed (Laclau, 1990: 97-134). This blocks the path to the regional distinction between social (discursive) practices and the materiality of the object (the natural properties of objects and extra-discursive conditions of emergence of discourse) (Boucher 2008, 95). The impasse that Boucher describes here should not necessarily prevent geographers from exploring post-Marxist theories of hegemony; instead, it should be seen as an opportunity for using them to enrich the concept. The dilemma that this post-Marxist turn represents is two-fold. On the one hand, the focus on the formal task of the articulation of democratic demands and the symbolic contradictions facing them that this theory provides is invaluable. However, to keep a certainly materiality in focus, I believe it is important to study processes of articulation not simply as discursive processes, but rather as relational ones situated in social space. The failure to articulate democratic demands for unification, economic and gender equality, and procedural democracy within a logic of equivalence is certainly a defining feature of the dilemmas that I shall outline in this dissertation, but problems of ideological articulation always also have lived, relational components that are difficult to ignore. Stephen Kipfer, for instance, argues against considering hegemony primarily as a discursive form of articulation – “a linguistic way of ‘fixing’ the interminable flux of signs that is, in this view, language” (Kipfer 2008, 202). Following Henri Lefebvre, Kipfer argues that this framework of hegemony, based on Saussurean linguistics, 13 constitutes “a form of ‘semantic reductionism’ that separates formal language structure (langue) from speech (parole) and thus detaches language as a whole from lived experience” (202). Instead, what I do in this dissertation is show how the articulation of democratic demands has much to do with a relational materiality, involving not just the discursive articulation of democratic demands, but also the politics of coordination that underlies them. This politics is influenced by both the structural transformations of Korean economy, and thus to trajectories of capital accumulation, as well as more everyday practices of protest and mobilization through which subjects of democratic struggles are identified and make claims. Therefore, the materiality of the political space of the reform bloc is multidimensional: it involves not simply changes to financial and labour policies, but also practices of collective bargaining, strategic mobilization, and protest. Such strategies are also shaped by textual strategies within reform discourse and the articulation and drawing together of not simply discursive claims for greater democratization but of the activities of a variety of different movements. This focus on materiality requires, above all, treating hegemony as a open, social space and looking for some of the multiple logics that condition it within a historical conjuncture. The work of Kristin Ross (1988; 2004) is an important guidepost here, as she provides a way out of simply positing hegemony as either purely a discursive structure or the mere effect of structural forces through situating hegemonic processes in social space. For Ross (1988, 8), “social space” allows her mediate between “the discursive and the event.” Ross takes Henri Lefebvre’s notion of social space (of space as produced through a triad of spatial practices, representations of space, and representational spaces; Lefebvre 1991) and shows how it is shaped by epochal political events in which democratic 14 demands are raised, such as the Paris Commune and the May ’69 events in France. Unlike Ross’s work on the Paris commune, which is based more on an analysis of relations internal to a particular event itself, what I have done here is try to focus on processes of coordination and conflict between reform movements that emerged from the democratic uprisings of 1987 and how they have informed, and in turn been informed by, changes to Korea’s political economy. In other words, my more process-based approach attempts to follow some of the ripples generated by an event rather than occasion of the event itself. Thus, while the analyses of political events like the Paris Commune or the Tiananmen Square protests often examine the everyday rupturing of social space and the creation of a new configuration, my approach to social space starts from the new interaction between the state and civil society, as a region of social space, produced by the event of democratization, and attempts to follows its transformation. The philosopher Alain Badiou (2005; 2004, 97-103, 153-162) has made an ontology of events as sites of truth, to which subjects attempt to maintain a fidelity through generic procedures, such as love, politics, and art; and in many ways, Ross is working to create a synthesis of Lefebvrian and Badiouvian ideas about space and events. In a similar way, I am quite curious how the politics of the 1980s movements and the forms of truth they attempted to articulate in the democratic uprisings continue to resonate among the liberal-progressive bloc. For me this is a way to get beyond a merely structural analysis of developmental state reform and include an analysis of the way in which democratic demands shape political space; one that is not based purely on a concept of linguistic articulation, but, rather, is open enough to examine how the experience of particular events inform the configuration of political space at a more 15 everyday and corporeal level; i.e. within a more differential materiality. As Badiou might argue, it is through the generic political procedures, in other words the political sequence unleashed by the events of the 1980s, that one might attempt to grasp the articulation of a political subjectivity. In other words, political subjectivity or subjectivation, and thus the subject of democratic equality, is not merely the result of an articulation of democratic demands, but rather is the result of a coming to terms with an event. Events are created by the grasping or disruption of an impasse, or void (this could be a lack of equality, democracy, a repression of desire, or something else that exists within a social space), and of retroactively seeing what it meant through generic procedures such as politics, art, etc. The subject emerges within this process, and is not external to it, and for Badiou the political subject is one that attempts to follow this sequence through, maintaining fidelity to the event. It is in relation to this political sequence, a sequence of the reform bloc, and not simply an assumed intentionality on behalf of the state, that I will situate my discussion of reform politics within. While the 1980s movements seemed to be based on three political cleavages involving demands for democracy, economic justice, and reunification (Choi 1993), the priorities of these movements, as well as the truths that their activism has presented seems to have changed over time or become disarticulated within political struggles.7 Understanding this process entails an approach that can analyze multiple sites of 7 Of course, other democratic demands for equality within gender relations and minority rights are important here; however, in the 1980s social movements they were generally articulated under a general umbrella of wider democracy movements (Hur 2006). While this dissertation is primarily concerned with the subordination of demands for economic justice to neoliberal reform, I read these demands in tension with an understanding of how they are shaped by, and are complimentary to, other democratic demands, such as demands for gender equality and recognition of ethnic diversity. 16 democratic struggle embraced by the historic bloc that led to democracy: from the nexus created by the integration between state and civil society after the 1987 events, to some of the very spaces in which new social struggles are taken up within civil society. My fear is that to some readers the shifting of scale, time and place this analysis requires may lead to some confusion, especially as the later chapters of this dissertation switch to a more grassroots scale of analysis; however, for me this focus is the only way to get out of the impasse of positioning civil society as an important influence on democratization and economic reform – as a site which must be included in order to understand how developmental strategies have been reshaped – without losing site of the very contingency of its construction (a problem I discuss in the next chapter). Indeed, while I argue in this dissertation that the problematic participation of labour in economic reform is perhaps the most important factor limiting the reform bloc’s ability to address substantive demands for democratic equality and economic justice – undermining its broader hegemony – I do not want to convey the impression that the labour movement is merely a cohesive bloc existing in civil society. The labour movements has its own strategic tensions, factional disputes, and ideological lacunae that also condition its ability to raise the issue of democratic reform, especially in regard to emergent issues such as irregular and migrant work, which is why I move from a more structural analysis of key national reforms in the first half of the dissertation to a more grassroots level in the later chapters. These later chapters illustrate something of the constitutive tensions in the reform bloc, as well as particular conjunctures where democratic demands have been articulated in a problematic fashion. While the examples of migrant worker protest and the reunification projects may be regarded as very localized examples of reform projects, 17 they illustrate some of the internal problems within the reform bloc and its difficulty in addressing some important emerging issues. These examples also illustrate the ways in which democratic demands have been reconfigured in the post-1987, or, rather, post- Minjung, era.8 Getting at the reconfiguration of the integral state in this dissertation often entails starting from a present point of tension and exploring how it has been worked through the new nexus between state and civil society created by democratization. Often reform dilemmas reach as far back as the tensions within 1980s social movements and involve a dramatic process whereby the democratic demands of the 1987 democratic uprising have either become articulated into or delinked from the process of economic reform. This conjunctural logic can be taken further, to show how the inculcation of particular ethical and moral habits within civil society expand much further than the nexus that I attempt to describe in this essay. This is something I hope to do in future projects, but for reasons of clarity and also for reasons of intervention – the desire to de-center state-centric accounts of developmental state reform by introducing the play of democratic demands being an important one – I have chosen to limit my discussion of developmental state reform to the politics within the liberal-progressive bloc and the relations between it and other social forces acting within the integral state. Therefore, as I have argued above, my approach in this dissertation is also a contingent one that is articulated in a strategic-relational field constituted by the multiple dilemmas facing reform forces in Korea. My only hope is that the ensemble of economic transformations and political dilemmas that this study seeks to 8 The concept of the masses or of the people (Minjung) as the subject of democratic struggle, as well as the influence of the Minjung movements on how social struggles are conceptualized is a theme that comes up throughout this dissertation. 18 identify will somehow provide useful coordinates for strategic interventions, both scholarly and otherwise, into the current political impasse of developmental state reform in South Korea. 19 Chapter 1: The Postdevelopmental State: The Long Decade of Economic Reform and the Reconfiguration of Political Space After the general election in 2004… the Roh administration came to enjoy a favourable political situation that no other democratic government before it had enjoyed. Paradoxically, when the balance if power finally began to tilt in favour of reform forces, the Roh administration began to make choices that took a conservative path and reversed the balance of power back to its starting point. The Roh administration’s own explanation has been that the resistance of the conservative opposition has been too strong. The more important reason for its failure can be found within, in its lack of internal capacity to implement changes. Choi Jang Jip, Democracy after democratization (2005, 297, 300) This long labour which gives birth to a collective will with a certain degree of homogeneity—with the degree necessary and sufficient to achieve an action which is coordinated and simultaneous in the time and the geographical space in which the historical event takes place…. is more or less a question of long processes of development… and how such wills set themselves concrete short-term and long-term ends –i.e. a line of collective action. Antonio Gramsci, The Modern Prince (1971, 194) The Decline of Developmental State Theory Throughout much of the 1980s and 1990s the Korean state provided much of the empirical terrain over which key debates about the nature of “developmental” states were fought (Amsden, 1989; Haggard, 1992; Kim, Eun-Mee, 1993; Johnson 1983; Onis, 1991; Wade, 1990; Wong, 2004; Woo, 1991; Woo-Cummings 1999; World Bank, 1993). Many scholars observed the strong role of the Korean state in managing economic growth and argued that its strategic use of nodal economic planning, government coordination of strategic financial resources, and regulation of market entry and exit, constituted an effective route to economic development that could be emulated by other late-developing countries should they follow their desire to “catch-up” with the West (Amsden, 1989). 20 There was not simply one, but many accounts of Korean economic growth. While some accounts stressed the merits of state autonomy and state intervention, others emphasized the factor endowment of East Asian economies and the market-conforming practices of states in that region. Building upon previous advances in development economics and studies of late-developers (Hirshmann, 1958; Myrdal 1963; Gerschenkron, 1962), scholarly books on developmental states and the “miracle economies” of East Asia proliferated into the late 1990s. Studying the role of the Korean state in fostering economic growth became a common career-path for many scholars, and the debates about state autonomy and state capacity that were a part of this larger research project resonated far beyond economic sociology to influence political science, development studies and even institutional economics (cf. Wade 1996).9 Often what was at stake in these debates was an understanding of development that could rival the mythology of the self-regulating market put forward by neoclassical accounts of East Asian development. By showing how the state was involved in governing or coordinating market forces, theorists of developmental states sought to show markets were key sites of social practice and did not autonomously regulate themselves. Marking the culmination of competing research projects by both heterodox and neo-classical observers, the publication of the World Bank’s ‘miracle study’ in 1993 was widely regarded as both a recognition of East Asian economic development and a concession to some of the alternative theories of it (World Bank, 1993; Wade 1996). However, even while the World Bank’s miracle study acceded to accounts of growth that 9 However, the influence of these debates were probably less felt in geography, which has relatively neglected the study of industrializing states in the third world and ‘emerging’ economies in comparison to other disciplines (Glassman and Samatar, 1997), though there are some exceptions. 21 ran counter to neoliberal prescriptions, economic restructuring would soon undermine many of the institutions behind East Asian economic growth as well the heterodox theoretical frameworks that had sought to describe it. This problem was compounded by the fact that many of the alternative models that scholars had produced to explain East Asian development were narrowly state-centric and seemed ill equipped to anticipate the 1997 financial crisis. This was because most accounts of developmental states were based on an understanding of economic growth that was teleological: positing an autonomous state as the key to late development, and successful development the work of an autonomous state. They could not explain development within a subtle framework of interaction between political and economic forces if the autonomy of the state was not apparent, even if strong state capacity still existed. This raised questions about the utility of the state-centric model to begin with. In South Korea, changes to the developmental state were already well underway while many of the classic studies were still being written. These changes started following the 1980 coup by Chun Doo Hwan. This coup led to the installation of the first neoliberal economic bureaucracy in South Korea (Kim, Yun-Tae, 1999), a full ten years before Jung-en Woo’s (1991) landmark study of Korean economic planning, Race to the Swift, was to emerge. In Japan there may be a case for a longer path-dependency of developmental planning (in the sense of continued co-reinforcing behaviour between the state and the economy), based on a continuity of Liberal Democratic Party rule in the post-war era and the long-term tenure of bureaucrats with a developmental orientation. However, by the time Johnson’s (1983) classic study MITI and the Japanese Miracle came to press, the rise of neoliberalism in foreign policy was quickly becoming apparent 22 and would start to alter Japan’s own developmental state in the years to follow, starting with the Plaza Accord of 1985.10 Thus, even at the time that early studies of the developmental states were being written, the rise of neoliberalism remained poorly explained. When they did account for it, studies of developmental states (e.g. Evans 1995) seemed unable to describe the many sources behind it. Substantive changes to developmental states were explained largely in terms of policy choice (Jayasuriya, 2005; cf. Burkett and Hart-Landsberg, 2000). Perhaps it could be argued that neoliberalism was too new in the early 1980s while many of the classical studies of developmental states were being researched or written. The acceleration of financialized capitalism, which has come to typify neoliberalism in the political economy literature (Dumenil and Levy 2004; Arrighi, 1994, 2007; Epstein 2006), though underway, had yet to take off in East Asia. Certainly after the 1979 Volker shock – what Dumenil and Levy (2004) regard as a ‘financial coup’— the percentage of US income and profits from the rest of the world compared to domestic profits had begun to accelerate (Harvey 2004, 23-31). But it would take until the end of 10 I generally define neoliberalism as an assemblage involving ideas about free markets that emphasize shareholder value, financial, trade, and labour market liberalization as well as an idea of economic subjects as rational, self maximizing actors (Homo Economicus) and markets as optimally self-regulating entities. These are ideational constructions and, of course, there is a great variability in the ideas and practices endorsed between them and the social contexts in which they are embedded (cf. Peck 2008; Peck and Theodore 2007; Ong 2006); but, commonly, neoliberal advocates generally endorse a more minimalist role for the state in economic governance (even though in practice neoliberal strategies have been accompanied by tremendous state intervention towards instituting market forms). This assemblage also involves variegated practices of reform and standards of governance, some of which exist at a more general, transnational level (such as multilateral trade agreements or BIS ratios) while other are tailored toward more local specificities (for example free trade zones, or particular forms of labour market incentives or financial deregulation). In general, neoliberalism has accompanied a general restoration of class power, particularly toward financial capital, since the crisis of the 1970s (cf. Harvey 2005; Dumenil and Levy 2004). 23 the decade for the impact of these trends to make themselves fully felt even in the United States. It was only by the end of the 1980s that investment in domestic finance, insurance and real estate in the US had reached historic highs (Brenner, R. 2002, 81-89). The capitalization of the US stock market did not begin its dramatic increase until the early 1990s alongside the marked increase of CEO compensation linked to stock options (Aglietta and Reberioux, 2005). And it was only by the late 1990s the US saw the record financial profits associated with financialization (Brenner R. 2006, 288-299). The influence of these processes on East Asian developmental states like South Korea was not so apparent until at least the early 1990s. The 1985 Plaza Accord between Japan and the US had actually helped South Korean exports (Hart-Landsberg, 2004) while Japan bore the financial effects of currency appreciation. Thus, until the financial liberalization policies of Korea's Kim Young Sam government in the early 1990s, the direct effects of financialization on economic growth in South Korea were more difficult to detect beyond the changes in the bureaucracy and largely minimal domestic financial market liberalization under Chun Doo Hwan. While financialization might not have been apparent during the 1980s, the relationships between state and civil society that were thought to compose developmental states – strong state, weak civil society – were certainly undergoing a radical reconstruction, especially in South Korea and Taiwan. For much of 1987, South Korea was rocked by pro-democracy protests that led to a significant set of political changes on the peninsula. More importantly, democratization would lead to the eventual restructuring of the social formation of state-led development and social regimentation that Korean scholars (Lee, BC 2006) have come to term as the developmental dictatorship (kaebal 24 dokjae) by opening up Korean society to expanded political competition. In fact, by the early 1990s, if not clearly in the aftermath of the 1997 crisis, a trajectory of democratic and economic restructuring had been put in place to such a degree that the Korean state could no longer be regarded as a developmental state; at least not in the terms outlined by the now classical studies of the developmental states cited above, which stressed the autonomy of the state from society and the strategic control, even repression, of financial resources by a nodal economic bureaucracy. The events of 1987 had the effect of separating the political from the economic elite, and paved the way for later restructurings of the economic bureaucracy. By 1997, the core areas of developmental planning, including strategic channeling of finance by the state to key industrial firms in return for export performance, strict government restrictions on entry and exit, and nodal industrial planning had all waned. Instead, what replaced developmental institutions is a complexly situated neoliberal project involving the expansion of market-based forms of economic governance and resource allocation, articulated alongside a project of democratization. Bringing Civil Society Back In If the restructuring of the developmental state is considered as a result of twin processes of neoliberalization and democratization, then the lacunae of developmental state theorists seems to consist in not being able to grasp the contingent relations behind these processes. In other words, though developmental state theorists were able to contest neoclassical understandings of economic development by showing the potential gains of state-led industrialization, they were not able to regard state-led development itself as a 25 contingent process. Instead, they regarded it as a product of state’s autonomy from society and neglected many of the social relationships within political and civil society that might lead to the restructuring of developmental states. This is unfortunate, because the events that led to democratization must surely have been apparent to developmental state theorists. There had been a noticeable upswell of protest against the dictatorship of Park Chun Hee and the harsh labour conditions of his export-led model that prevailed in the mid to late 1970s. Even though these protests were severely repressed with the onset of the Chun Doo Hwan regime in 1980, by the mid 1980s they were again gathering momentum (Koo, 2002; Lee, NH, 2002, 2008). This lack of an adequate relational focus, one that can grasp the interaction between civil society and the state, impairs the various theories of the developmental state from understanding the sources that condition state capacity. This is why, in many ways, the developmental state as a research paradigm quickly fell out of favor after the financial crisis in the late 1990s. Scholars from both neoclassical and institutionalist traditions failed to situate the crisis in terms of the reconfigured relationships that had come to inform state practices. Instead, in the wake of the 1997 crisis, they quickly fell back on searching for areas where their core assumptions (strong states or market equilibrium) could still be applied through often ad hoc hypotheses (Jayasuriya, 2005). Thus, much of developmental state theory outside of institutional economics became discarded since state autonomy could no longer be taken for granted. The decline of developmental state theory means that neoclassical approaches to economic growth have lost an important contender; one that seemed for a brief moment to have the potential to advance a more historical-geographical understanding of development. 26 This problem points to the need for critical accounts of economic development and reform that can situate state capacity in a more expansive relational field than that of previous state-centric approaches. This is necessary not simply because civil society has been an important part of the story of economic reform in formerly developmental states like South Korea, but also because there is a need for an understanding of development that can situate economic processes more critically within historical-geographical experience in order to decenter accounts that pose development as a necessarily self- regulating or state-led process. When I first began this case study, I was more interested in how the key financial policies outlined by developmental state theorists had changed, but, examining the political relations that conditioned state reform, I began to realize that the theoretical construction of the model was flawed to begin with (see Chapter 2); thus, I felt that I could not give an account of developmental state restructuring without also showing how the politics of developmental states and their reform was much more expansive, involving key reforms to not just finance, but labour and other sectors, and involving a host of state and non-state actors in what are often a very conflictual politics. In other words, I found that the task at hand was to introduce a level of contingency and relational interaction into accounts of East Asian growth that can decenter that often teleological view of development that posits economic growth as both linear phenomenon and a historical project where the rules of the market or state-led intervention are somehow deemed external to sets of power relations within society. A similar purpose seems to underscore contemporary postcolonial and postdevelopmental approaches to development within geography (cf. Gidwani 2008; Wainwright 2008). 27 What I seek to do in this dissertation is to show how the reform of the Korean developmental state has been shaped by a dynamic set of interactions between the state and civil society. My goal is to show how state capacity is never simply a question of state control over economic resources but also involves a politics of economic reform. This politics in many ways determines the priorities of reform and is shaped by often shifting alliances and situated conflicts that extend far beyond the state bureaucracy. Thus, situating the reform (and even original configuration) of developmental states within a more relational field of interaction, I argue, enables a critical examination of both the potential (and negative consequences) of state planning and market governance in a way that is more sensitive to the multiple power relations that shape social space and thus also shape economic growth. While it has been informed by a reconfiguration of relations between political and civil society, the outcome of economic reform in South Korea has not necessarily been the cause for much celebration by the liberal and progressive forces who targeted the institutions of the developmental state for democratic reform. On the contrary, the embrace of neoliberal reform by both conservative and reform-oriented governments from June 1987 to the present has been the source of much tension and conflict. That the reform of the Korean developmental state has been an agonistic, and often antagonistic, process, speaks then to the need for an examination of the problems that reform oriented forces have had in pushing the economic strategies of the Korean state towards a more egalitarian and participatory assemblage. The source of many of these problems encountered by reformers lies, I argue, in the events of 1987 and the ways in which the democratic demands articulated within those events have influenced the reform process. 28 In particular, the way in which liberal and progressive forces were fused together within the democracy movement has led to internal problems of coordination within the reform bloc that make it difficult to institutionalize a broader politics of social solidarity which might ensure a more lasting hegemony for democratic reform. Instead, the economic policies of the reform bloc have been based around institutionalizing neoliberal reform that has weakened its own political base. The reform bloc has, in many ways failed to learn a lesson understood by the old regime, and that is that industrial policy, whether it is democratic or developmental, can be used to strengthen political power. In the absence of distributional measures, the old regime turned to developmental politics to legitimize its rule, although it eventually undermined itself through its authoritarian politics. While neoliberal reform has embraced some demands for transparency, it has not resolved the impasse created by the old model (an impasse between economic growth and distribution) and, in turn, has strengthened the power of the conglomerates from the old power bloc and introduced a degree of instability into the labour market and financial structure that was hitherto absent. This failure to implement an alternative to either the developmental state or to neoliberal reform undermined social solidarity and thus limited any broader democratic reform efforts, creating a situation similar to what Chantal Mouffe (2000) has called the democratic paradox. While democratic demands such as those for economic justice are largely constituted on the grounds for popular sovereignty, economic liberalism can serve to undermine those demands, and thus, support for democratic reform. Mouffe regards this tension as a constitutive one for democratic thinkers, however, the failure to work through this paradox, and to minimize the social antagonisms produced through it, has led to a pronounced fracture among reform forces 29 and the return of conservative government. As the reform bloc disintegrated in the 2007 presidential elections, this fracture also brought to a close what I shall call the “long decade” of democratic reform by reform forces and reform governments. This crisis of the reform bloc provides something an introduction and an end point to this dissertation as it is the point from which I will work back in order to understand how demand for egalitarian reform became subordinated to neoliberal policy as the reform bloc attempted to reform of the structures developmental state. To better understand this outcome, it is important to begin with the events of 1987 and to examine how the interpretation of the democratic demands articulated within those events have informed the debate around the current conjuncture of reform governments and the search for a more substantial alternative to developmental and neoliberal politics. This will give the reader a clearer sense of some of the areas of perceived policy failure and as well as some of the operative tensions within the reform bloc. The Long Decade During the 1987 events in Korea, radical demands for democracy, equality, and peace became articulated together, albeit in often-contradictory ways (Park Mi, 2005). These demands were part of a generally united protest movement attempting to overcome decades of military dictatorship, cold war aggression and militarized labour relations that had been a constitutive part of the rapid export-oriented industrial development model that Korea had followed in the preceding 30 years. By the end of 1987, rapid progress had begun. Free elections were announced in June; underground labour movements began to be recognized throughout a summer of workplace agitation; intellectuals and 30 civil society groups could now more openly advocate a peace regime for the peninsula. What the 1987 protests represented then was something of polyphonic event, in which multiple demands, constructed largely on an axis of radical equality (in the political system, in the economy, and on the peninsula as well between the peninsula and the world) came to be asserted. As Choi (1993) describes, the democracy movement was a movement of movements in which most social struggles came to be represented as struggles for democracy, economic justice and reunification. Hur (2006), for example, argues that while demands for gender equality were included in these demands, feminist movements remained under the umbrella of the movement for political democracy, building up their own organizations alongside it in order to create an independent voice for women outside of the women’s sections of the state-mobilized New Town (Sae Maul) movement. It was not until after the 1987 events, when the feminist movement expanded its own autonomy within civil society and mobilized on a broader mandate, that a stronger dialogue with international feminist movements began to emerge. A similar pattern existed for other new social movements. Despite the fact that the formal transition to civilian rule began in 1987, it would take another ten years before civilian democratic regimes with a strong connection to the democracy movement would come to power.11 The years 1987-2007 can be a considered a “long decade” in the sense that many of the political tensions and aspirations that later informed the reform governments had their roots in the 1980s social movements.12 In a 11 Though Kim Young Sam was connected to the oppositional democracy movement, his political party was created through a merger with members of the former conservative regime and thus is not regarded among scholars to be a fully civilian regime. 12 While my concept of the “long decade” resonates with the concept of long-duree or ‘long centuries,’ the focus is somewhat different. For example, Arrighi (1994) speaks of 31 sense, the reform governments of Kim Dae Jung and Roh Moo Hyun (1997-2007) were only the high water mark in terms of the institutionalization of larger transformative movements that led to transition in 1987. Thus, it is important to study these reform governments within the larger political trajectory of the long decade because it is in this period that one can see to what extent the polyphonous demands of the democracy movement entered into the ruling hegemony, and how particular goals became transformed, co-opted, excluded, or abandoned. As such, this dissertation is largely concerned with the latter half of this decade, and especially the politics of economic reform under the Roh Moo Hyun administration; though, I attempt to read this period as part of the large trajectories of reform politics since 1987. It is also during this long decade that the economic policies of the developmental state outlined by the classic studies of the Korean developmental state were reformed to the point that, by comparison, Korea may now be represented as something of a “postdevelopmental state.” While Hahm and Pleine (1997) use this term to describe institutional changes to the Korean presidency and bureaucracy in response to pressures for liberalization, I feel that the term is useful for describing the wider consequences and strategic dilemmas of neoliberal state restructuring encountered by the reform bloc.13 My long centuries to describe to development and domination of the world economy by various hegemonic powers. I use the concept of a long decade here in a much more modest sense: to denote a political process that has developed over a much longer time period than the formal decade of rule by liberal-progressive governments. 13 Aihwa Ong (2006, 75-80) also uses a similar term of “postdevelopmental strategies” to describe particular forms of economic regulation in Southeast Asia which resonate somewhat with some recent Korean industrial policies, and which are discussed in more detail in Chapter 7. In addition, while the term postdevelopment is often used to signify a critique of development thought (cf. Escobar, 1995; Sidaway, 2007), I use it here in a somewhat different sense, described below, though I do sympathize with much of the 32 use of the term here is influenced by a critical tension with developmental state theory, as the term captures the fact that a transition has occurred in key policy areas of the developmental state, including the state capacity over financial resources and its use of industrial policy. In this way the term postdevelopmental state represents a loose periodization – referring to something “after” developmentalism – while also signifying that there seems to be a determined undecidability about the embrace of neoliberalism. A key problem of the reform bloc has been envisaging a democratic deployment of developmental policy; one where state capacity to control financial resources and regulate the labour market can be used in a way that compliments demands for economic justice and democratic equality. This is not to say that reformers are unhappy with the many procedural reforms that have diminished the political power of authoritarian governments, but that the establishment of a substantial alternative to socio-economic inequalities, the power of political elites, and geopolitical tensions of the old regime has not been sufficiently developed. This feeling of inertia has created tension within reform bloc, and contributed to its fragmentation. I use the term postdevelopmental state to outline this strategic horizon, above all, as a problem that affects reform forces in South Korea and not as general account of the economic policies of the Korean state.14 The fragmentation of reform forces is largely related to different views among Korean reformers about how much fidelity to the politics of the democracy movement there has been on the part of reform governments during the decade of their rule. This postdevelopment scholars’ critique of the alleged teleology behind many developmental strategies. 14 Here, I am guided by Hall’s (1985) response to critics who mistook his use of the term authoritarian populism – which Hall developed to describe particular aspects of the politics of Thatherism in Britain – as a framework for a global model. 33 debate has perhaps been the most pronounced during the regime of Roh Moo Hyun’s participatory government, which is the period I will largely concentrate on in this dissertation. While Roh’s government included more reform activists than previous governments, its embrace of neoliberal reforms like the Kim Dae Jung government before it has created a sense among some intellectuals within the wider liberal- progressive bloc that democratic reform has been a partial failure. This much was expressed in the waning days of the Roh government when a number of reformers came to debate the nature of Korean democracy and the legacy of reform governments. Some of the tensions and competing tendencies that have informed the reform bloc became quite pronounced in this debate, as was particularly apparent in the exchanges between Korean scholars Paik Nak Chung and Choi Jang Chip. The exchange was novel not merely for their assessments of reform governments, but also for how it shows that priorities once co-articulated by the democracy movement began to move in separate directions. This ongoing debate was loosely known as the “progressive debate” among Korean reformers, activists and intellectuals, and in many ways it reveals how the political space of interaction between political and civil society opened by democratic reform has been an important site of contestation, and also strategic cooperation, that informs the direction of state policy and reform politics. The Progressive Debate The progressive debate emerged during the waning days of Roh Moo Hyun’s ‘participatory government’ and in anticipation of the December 2007 presidential election; however, it was initiated in many ways by Choi Jang Jip in response to his 34 disappointment with Kim Dae Jung government and his perception that the problems of the Kim regime would continue to inform Roh Moo Hyun’s participatory government. In his book Democracy after Democratization, Choi (2005) argued that democratization in Korea has been a conservative process that has failed to include the interests of the labour movement and of everyday citizens – what Choi terms the ‘common people’ (seomin) – into mainstream politics. For Choi, this is a problem of ideological competition at the level of representative democracy, which, in his view remains limited because of the embrace of neoliberal ideology by successive liberal governments. [The] political exclusion of labour interests and perspectives amounts to an exclusion of the most significant potential force for suggesting competitive ideologies for the creation of public goods, such as social integration, social welfare, and social justice. Also, in terms of social class structure and the inequalities produced by the market, and in terms of checking the chaebol’s unilateral advantage of power in the economy and society, this exclusion cannot but create negative impacts (Choi, 2005, 268-9). Without the inclusion of substantial demands and policy issues favoring workers and livelihood issues, Choi argues, political power remains predominantly in the hands of an elite-led party system, the domestic conglomerates, economic bureaucracies and the executive branch rather than in a more participatory and democratic formation with stronger involvement by civil society and the social movements. For Choi, the origins of this problem are to be found in the post-war history of South Korean politics in which anti-communism and authoritarian industrialism came to dominate the political economic field. This process left the economy oriented toward pro-growth mobilization and political society dominated by conservative interests with only regional rivalry to provide the basis for political competition. The democratic transition may have dulled the impact of anti-communism and facilitated the expansion of civil society, but political 35 competition on the basis of ideology remains narrow. The consequence of this, Choi argues, is that Korean democracy continues to lack an important countervailing power within the political system that can check the influence of elite-led politics and broaden the basis of political competition. Though Choi’s book was written largely out of discontent with the Kim Dae Jung regime, in which he participated as a presidential policy advisor, in the afterword to subsequent editions and in interviews and other publications, he has expanded the argument to include both the Kim Dae Jung regime and the Roh Moo Hyun regime. This is something that has angered both Roh himself and rival reform intellectuals. Roh was formerly a human rights lawyer and had a strong image of himself as a member of the reform bloc, using his extensive networks with oppositional social movements from the democracy movement era to expand consultation with civil society groups in policy formation. Roh’s “participatory government” like Kim Dae Jung’s “participatory economy,” included many former democracy movement activists and reform forces that had come to political maturity in the democracy and student movements of the 1980s and had ambitious plans for reform. However, reform projects became stalled after the election due to ongoing scandals and proceedings by the opposition conservative party as well as members of the president’s own Millennium Democratic Party to impeach Roh in 2004. In the midst of large candlelight vigils in support of Roh, a general election was called and Roh’s newly formed Uri Party (Our Open Party) won by a clear majority and impeachment charges against the president were dropped. It appeared to progressives that they had a clear mandate, however they failed to act on it. Soon after the election, Roh’s policy choices began to alter from the course that he set out. Roh’s decision to send 36 troops to Iraq, the breakdown of social dialogue in labour-management-government negotiations over labour market reform, and the announcement of Korea-US free trade deal alienated the President’s support base among a number of social movements and civil society groups. Furthermore, due to low public opinion ratings, his attempt to form a “grand coalition” with the conservative Grand National Party alienated liberal reformers in his Uri Party, and, by the summer of 2007, Roh’s ruling government party had split into moderate, progressive, and conservative factions. Choi was not the first to criticize the Roh government for its lack of political originality, but his criticisms in both Democracy after Democratization and in the popular press attracted the attention of the president himself and revealed the fracture between the Roh government and many of its progressive supporters, especially among the cohort of democracy movement activists known in Korea as the 386 generation.15 In reaction to the criticism that by embracing a neoliberal policy orientation he followed the wrong path, Roh accused his critics of “inflexible progressivism,” signalling Choi out in particular but also other prominent critics from the progressive bloc, including some of his former political advisors and presidential committee members who had become increasingly vocal in their criticisms of Roh government policies. These advisors had argued that the concessions made in the negotiation of a Korea-US Free Trade Agreement (KorUS FTA) marked a U-turn away from redistributive economic policies 15 The term is a reference to those who were born in the sixties and went to college in the 80s and who were in their thirties in the 1990s when the term was coined. The term 486 has sometimes been used to refer to this cohort to denote the passage of time. 37 that had been formally embraced by Roh.16 The tension created by this debate spilled over into the 2007 presidential election campaign. The debate continued as progressive intellectuals debated which direction the progressive forces should take in the campaign. A split existed between those that argued that a progressive political party should base its campaign on opposition to neoliberal restructuring and another camp which emphasized the continuation of the Sunshine Policy – the policy of reconciliation with North Korea that had been begun by Kim Dae Jung and carried on by Roh Moo Hyun – and centrist economic policy as the political basis of a coalition of reform forces. The debate was not simply about electoral strategy but was also a struggle over the contested memory of 1987, and the extent to which claims for national reunification could be divorced from other claims for political and economic equality. Paik Nak Chung, another senior intellectual of the progressive movement and a critic of Choi Jang Jip’s theory of conservative democratization, waded into the debate on the side of the pro-Roh forces. Paik criticized Choi’s theory of conservative democratization and his opposition to Roh’s neoliberal policies and argued that the end of the division system – the partition of the peninsula by separate regimes begun in 1945 that, Paik (2007) argues, took on a systemic status after the Korea War -- should be the first priority of progressive forces. [T]here is a prevalent sense of crisis in Korea today that the so-called '87 regime that was formed after June 1987 has now reached its limit and is in need of a new breakthrough. While searching for an answer, some analysts offer a diagnosis that although formal and procedural democracy was achieved through the June Struggle, substantive democracy in the economic and social fields has remained inadequate or has even suffered a retreat. This view grasps only part of the truth 16 See “President Criticizes Progressives” February 17 2007. Korea Times. Roh accused Choi Jang Jip and others of inflexible progressivism. See also Lee Jeong Woo. FTA could make or Break Roh government’s Legacy. Hankyoreh July 20, 2006. 38 and we must beware of such a facile dichotomy…Going beyond such one- sidedness is an important task for us as we commemorate the 20th anniversary of the June Struggle… In the period of tyrannical rule by the government of a divided nation, mere advocacy of the principle of peaceful and autonomous reunification or of an egalitarian society, or the immediate struggle for basic civil rights could serve to shake the division system. However, with the end of military dictatorship and the newly opened space for more substantive endeavors, the need arose for a centrist line that could incorporate the various agendas of various forces with a view to a clearly conceived goal of transforming the division system. Close to twenty years later, Korea now finds itself in an even more urgent need of a line focused on radical transformation in this sense and broadly centrist in practice (Paik Nak Chung, 2007). The main distinction being debated here can be regarded as one between economic justice and reunification and illustrates a central line of tension within the progressive bloc. Although these logics are intertwined, a greater stress is often put on one or another, rather than a logic of equivalence that can sufficiently address the democratic demands of both. Thus, for Paik, the problem of neo-liberalism is viewed more as a subset to the division system than as a problem to be co-articulated as equal in importance to reunification. For Paik, the problems of neoliberal capitalism are integrally related to the partition of the Korean peninsula and the creation of separate socio-economic systems on either side of the border. Thus, the solution to political cleavages in South Korean politics is related to overcoming this larger problem, so that the Korean peninsula can deal with the problem of how to organize its socio-economic system on a more independent basis.17 The subtle subordination of economic justice these nationalist priorities within the reform bloc speaks to a problem of both articulation and co-ordination among reform forces. The 17 This debate also speaks to a second distinction between a politics based on an ethnic identity rather than on civic and economic justice. Although Paik himself has tried to keep a critical tension between the two in his thought, it is the former that dominates. For the debate between Paik and Habermas on ethnic versus civil nationalism in the New Left Review during the 1990s, see Paik (1993; 1996) and Habermas (1996). 39 promotion of a centrist political platform was seen by Paik and others of the reform bloc as a necessary hegemonic manoeuvre based on the assumption that reunification would be a more unifying political platform if untethered from progressive economic reform. Strategically, in the elections that followed, this move failed. A strong emphasis on economic justice and domestic economic growth was not made by the Democratic Party and conservative forces were able to gain ground by promoting a rhetoric of economic populism. As Roh’s Uri Party broke up, a coalition was formed around the United New Democratic Party (later to become the Democratic Party), which evolved out of this factional infighting, and embraced much of Paik’s position (indeed Paik was instrumental in attempting to get progressive forces to unify behind a single candidate). The party entered the 2007 elections promising to continue the neoliberal trade, labour and corporate governance policies of the Roh government but with perhaps even less emphasis on redistributive reform. In an election fought largely on the politics of economic growth and the increasing polarization of rich and poor, the UNDP became associated with the lackluster economic performance of the Roh and Kim governments. Conservatives from Korea’s new right (cf. Shin KY, 2006; Lee Byeong Cheon 2006b) had successfully spun this period as a “lost decade” of economic growth. The conservative opposition won the election by a landslide by promising a return to the high growth years of the late dictator Park Chung Hee. What was ultimately at stake in this debate amongst progressive forces was the opportunity to present an alternative to the division system; one that would not use neoliberal reform to create space for progress on engagement projects. Unfortunately, none of the parties from the liberal-progressive bloc 40 effectively resolved these concerns. The long decade of democratic reform initiated by the 1987 protests appeared to have come to an end in the crisis of the participatory government. Hegemony and the “Integral State” The long decade of reform by governments supported by the liberal-progressive bloc represents an interesting conjuncture where the logics under which state and civil society had previously been considered by developmental state theorists have been undermined through epoch shaping events: the democratic uprisings of 1987 and the economic crisis of 1997. This conjuncture has changed not only how the economic policies of the Korean state must be considered, but also, I would argue, how they are studied. While above I recommended a focus on the liberal-progressive bloc and the expanded nexus between state and civil society, it seems important to discuss in more detail how, theoretically, this nexus, that of the “integral state,” is to be understood. Civil society is normally defined as a sphere of activity or site of struggle outside of the sphere of production and outside of the state (cf. Urry 1981). While I agree with the shorthand that civil society generally connotes an outer region or ‘outside’ of the state apparatus, an ontological definition of state and civil society based on such a distinction is difficult to endorse, as is a distinction separating civil society from the sphere of production. This definition has its roots in Hegelian understandings of civil society as a sphere of interest and freedom – an understanding which underlines many modern definitions of civil society, including Jean Cohen and Andrew Arato (1992) normative definition of civil society as a sphere emphasizing legality, privacy, association, plurality, 41 publicity and mediation. In my opinion, the groups that carry out these functions at any one time, however, seem to be variable, and tend to influence the state in a variety of ways. The interaction between groups outside the state and the state itself cannot be said to be strictly normative or concerned at all times with interest group mediation rather than political opposition, societal transformation (including transformation within the sphere of production), or even the attainment of state power.18 The normative definition is thus merely an ideal-type. As Kim Dong Choon (2006) points out, the concept of civil society itself (simin sahoe), versus what might be called mass politics, is a relatively new invention in South Korea. Many groups falling under that heading of civil society are still concerned with “comprehensive” societal transformation and mobilization (cf. Lim Hy- Sop, 2000) rather than functional or normative roles. Furthermore, many reform politicians as well as bureaucrats who have taken up positions in the state. Therefore the conceptual distinction between state and civil society is much more fuzzy than normative definitions let on. Instead, I prefer to regard civil society, as such, as a relational category. In other words, it is something that needs to be situated in time and space, and always in relation to other social actors. For instance, Hart (2002a) argues that Gramsci (1971) did not regard civil society as an autonomous sphere of freedom but something that must be analyzed in relation to the other structuring parts of the extended state. Gramsci’s formulation of the “integral” or “extended” state consists not only of political society, or government, but also civil society (Gramsci, 1971; Sassoon, 1980). Gramsci sees the 18 In case there is any ambiguity, in this dissertation I regard the labour movement as important actor within civil society as well as the integral state. In many ways, this role is variable, and the labour movement is often excluded from hegemonic participation in civil society and the state. However, this exclusion should not be thought of as the effect of an a priori ontological exclusion of the labour movement from civil society, rather it should be considered the effect of hegemonic processes. 42 roles played by these different parts as historically and geographically variable. Therefore, it is difficult to a priori assign a strict functionality to different parts of the state apparatus; rather the role of the integral state must be examined within a definite conjuncture. In my discussion of the reform of the Korean developmental state, I try to adhere to this definition. Therefore, my discussions of the nexus between state and civil society as well as particular policies should be regarded as an elaboration of transversal points within a larger conjuncture of social relations between actors involved in the democratic transformation of the Korean political economy. In other words, state and civil society should be regarded as variable points within a constellation of social relations, rather than merely independent, static or substantive identities. They are merely shifting regional identities within social space rather than a coherent whole unto themselves. For Gramsci, the different parts of the integral state are articulated through hegemonic processes in which consent is organized and delimited, through coercion if necessary, and a relation of forces between state and civil society arrived at (cf. Anderson 1976). Gramsci was keenly aware that in order to be hegemonic, different regimes do not simply try to impose their own ideas in the organization of social and economic life, but rather, mediate them with some give and take among social forces (relations of power, social actors) by endorsing certain social practices and positions above others. As a process, the creation of hegemony is “inherently fragile” and something that “must be constantly renewed, recreated, defended and modified” through multiple socio-spatial trajectories (Hart, 2002a, 26; cf. Hart 2007; 2006; 2004, 2002b). These include, but are not limited to, the spaces involved in the ideological articulation of political positions, the 43 organization of economic behaviour, and the distillation of ethical and moral habits that affect everyday life. Thus, the analysis of hegemony has to be sensitive to the various spatialities through which power is worked and extended geographically into state and civil society, as hegemonic processes are articulated along multiple axes of difference and domination that concern not only relations of class but also gender, ethnicity, and other power relations -- what Laclau (1997) describes as the “constitutive outside” of class relations (c.f. Gidwani, 2008). While this approach to hegemony also entails a discursive understanding of hegemony, and in many ways borrows from the understanding of articulation put forth by thinkers such as Hall (1980) and Laclau (1985),19 following Hart (2002), I think it is important to advance an analysis of hegemony than does not locate it purely on the discursive level. As Peter Hallward argues, the limitation of Laclau’s recent reconceptualization of populism is that “Laclau conceives of the ‘construction of a people’ not in terms of power, unity and will but in terms of heterogeneity, difference and language, he conceives of any populist ‘articulation of a chain of equivalences’ first and foremost in terms of representation” (2009, 28 n. 51). This focus on representation tends to evacuate a certain materiality from the study of hegemony, including the ways in which subjects are often de-voluntarized through representative strategies, especially those occurring in the integral state. Instead, it is important to examine how hegemony is located in social space, i.e. how it is embedded in multiple dimensions of everyday life and the forces that shape it, including particular historical events, and the democratic 19 Hall (1986) describes some of the tensions between different trajectories within the circle of British Marxist theorists who began to return to Gramsci in the late 70s and early 80s. See also Hall, 1979; 80; 1986; Laclau 1979; Williams, 1973. Hall also bases much of his theory of articulation on the work of Wolpe (1988). 44 demands that emerge from them. This is why I have introduced this dissertation so far by discussing the progressive debate and the arguments about conservative democratization and the exclusion of labour interests. These claims emerged from the events of 1987, which were themselves produced out of the experience of the developmental dictatorships; including the economic policies and politics of these regimes, as much as their brutality and repressions. These events and the demands that emerged from them provide a constitutive part of the reform bloc, one that is mediated through representation, but which also has a materiality that exceeds it, grounded in events and thus in time and space.20 That demands about labour’s inclusion into the reform bloc, in both representation and structural reform, have remained the most problematic component of reform government’s attempts to hegemonize the democratic demands of the reform bloc,21 points then not to some simple ontological priority that inherently subjectivizes workers and gives them a privileged position within the social sciences – i.e. the old Marxist adage that capitalism produces its own grave-diggers. Rather, the existence of these demands speaks to an event, or series of events, ranging from the personal to the collective, in which gaps or contradictions in the developmental dictatorships were grasped and articulated together in the form of demands; most of them demands for political and economic equality. These demands thus form a multitude, a “multiple” that failed to be represented under the old regime, and one that encompasses 20 This gap, like antagonism in the political sphere, is always present; therefore, it can be analysed in terms of how problematic this gap for the articulation of particular sets of demands. 21 This point needs to emphasized. It is not simply the reform bloc’s attempt to be hegemonic that I am after here. Rather, it is their attempt to hegemonize demands for democratic equality that I am interested in, especially the reflection of these demands in strategies for economic reform. 45 multiple, contingent power relations that extend far beyond what is normally relegated to the concept of class.22 That demands surrounding labour and its role in democratization would remain the most problematic (demands that reconfigure more than class but also the transversal power relations through which labour is constituted), then, speaks to a political conjuncture, a series of events, informed by economic constraints. It does not assign to the economy a determining force that is somehow outside of politics and culture. Such a geography conceives of space not simply as a container in which different economic practices are pursued, but rather as a social space that is process-oriented and in constant flux. Kristin Ross for instance, argues that such an analysis has long been a priority within human geography. She argues that Reclus’s original design for a radical human geography was centered around an awareness of conflicts in social space, against traditions that attempt to subordinate the study of social relations to particular landscapes (Ross 1988, 90-94). A similar priority, and understanding of social space, undergirds this study. The articulation of democratic demands are analysed not only for their representations of space (the targeting of space for democratic reform) but also in terms of the practices through which they are articulated (practices of protest and alliance building, reorientation of capital flows) as well as the representational spaces in which they are articulated (the nexus of state and civil society, historic spaces of protest). In this 22 The radical implications of this insight for the study of class and other power relations, political economies, and cultural politics should not be understated. However, to a degree such a perspective, based on the interrogation of events and building primarily off the work of Alain Badiou, Henri Lefebvre, Kristin Ross and other theorists, is still very much an emergent paradigm in the social sciences. The emergent work a younger generation of scholars, working mainly in the UK in philosophy and sociology, including Peter Hallward, Alberto Toscano, Nina Power, Owen Hatherly has in recent years begun to constitute a larger space for such research. 46 way, I hope to show how the spaces of developmental state reform are never simply self- contained, autonomous spaces of meritocratic planning and control, but rather social spaces where processes of economic reform involve relations of coordination and conflict, as well as articulation and enunciation. Attention to substantive demands articulated in these spaces allows a more concrete contextualization of developmental reform within actual interests and political sequences. Of course, one might argue that situating developmental state reform in this way may overemphasize the agency of political forces, but for me, showing how substantive demands for economic democracy and socio-economic equality have been marginalized within the reform bloc seems an appropriate way to examine state power without losing site of concrete political intentionalities. As Gramsci (1971) remarks, [O]ne might say that only to the extent to which the objective aspect of prediction is linked to a programme does it acquire its objectivity… if one excludes all voluntarist elements, or if it is only other people’s will whose intervention one reckons as an objective element in the general interplay of forces, one mutilates reality itself… This is in contrast with the habitual way of looking at the problem. For it is generally thought that every act of prediction presupposes the determination of laws of regularity similar to those of the natural sciences. But since these laws do not exist in the absolute or mechanical sense that is imagined, no account is taken of the will of others, nor is its application “predicted”. Consequently everything is built on an arbitrary hypothesis and not on reality (171). In other words, approaching hegemony from the perspective of how the historical demands of the democracy movements, and especially egalitarian demands, have informed it seems a much more grounded method than posing the state as distinct, autonomous actor, unbound from society. 47 Postdevelopmental Dilemmas As the progressive debate revealed, at the heart of the politics of conjuncture between democratization and developmental state reform is the reconfigured nexus between political and civil society. While the reform process has involved more expansive participation in the policy process than under previous military regimes, the way in which civil society has been utilized as a source of reform ideas and social partnership has remained problematic. Reform governments have used the nexus between the state and reform movements to legitimize a hegemonic direction for state policy rather than as a forum in which a more inclusive and egalitarian hegemony could be formed. As the progressive debate revealed, this is a problem that can be seen the lack of a clear strategy for reforming the developmental state in a way that strengthens the democratic demands of multiple constituents within the reform bloc. It is thus a problem that involves the way in which the state and the market have been targeted for democratic reform, but also to the ways that democratic participation has been utilized by reform forces at both the national and grassroots levels. Therefore, any reading of developmental state reform from the perspective of the integral state will also need to examine how democratic participation and democratic equality have been conceptualized and institutionalized by reform forces. This focus inevitably calls for an analysis of hegemony that is sensitive to some of the multiple power relations that shape civil and political society. I will attempt to do this by examining a series of conflicts surrounding economic restructuring which reveal key areas of transition away from the old model – and some of the areas of inertia – in 48 relation to ongoing conflicts that have informed the restructuring of the Korean developmental state and moved it toward a more neoliberal alignment. I begin my empirical chapters with an examination of financial policy and conflicts surrounding the reform of the domestic conglomerates. However, since the developmental state theorists by and large neglected other important areas of state policy such as relations between the state and labour, I hope to expand the policy focus somewhat to include a substantial examination of the labour politics of the postdevelopmental state, which is more clearly the focus of the latter half of the dissertation. There is a clear reason for this. The position of labour within the democratic reform process has been one of the most problematic aspects of reform governments and it deserves a more comprehensive examination particularly since demands for economic justice and economic democracy have historically hinged upon the social solidarity between wage-earners and other social actors (cf. Esping-Anderson 1985). That the reform governments were been unable to institutionalize social solidarity speaks to a critical problem within the reform bloc and the way in which economic reform has been carried out thus far. Any progressive alternative to the developmental state, or to neoliberal reform, especially if it is to be an egalitarian alternative, such as social democracy or something similar, has to crucially consider the position of labour in its economic model and political strategies. Whether it be through greater distribution, higher wages and government-stimulated domestic demand, or through active credit and labour market strategies, a greater space needs to be accorded to wage earners within the Korean model in order for a more substantial alternative to emerge. This dilemma is reflected on the political level in terms of the participation of workers within reform governments and their representation at a variety 49 of institutional levels including unions, NGOs, political parties and social partnership organizations. Encouraging greater worker participation in economic reform, in other words, involves a series of both economic reforms and political commitments, and thus involves the very nature in which political demands are articulated and the power relations through which they are negotiated; the latter include not only relations between different reform groups buts also gender and ethnic relations that influence the types of policies that come to represent economic justice. Posing the problem of democracy in this way, as a set of demands and a variegated process of articulating them, is also a novel way to study political geography, as it tends to put the focus on multiple sites of political articulation, rather than simply on parliamentary procedure and electoral competition. The problem of democratic participation has manifested itself at a variety different scales and sites during the reform process, as I shall show in the following chapters. The embrace of a shareholder model of neoliberalism and the attempt to use institutions of social cooperation to expand temporary and irregular forms of work have limited the ability of labour to participate in the participatory governments of Kim Dae Jung and Roh Moo Hyun. However, the participation of workers and labour unions (especially precarious workers such as migrant and irregular workers) in the reform process has also been limited by the internal politics of labour and civil society organizations as well. These politics inform the way that reform forces have responded to the restructuring of not only the financial system but also to other effects of neoliberal reform such as the feminization and transnationalization of irregular work. The difficulty that reform forces have had in addressing this problem informs other democratic projects such as projects for reunification such as the Kaesong Industrial Complex where, once 50 again, questions concerning the role of labour have become subordinated to more neoliberal and market-based inflection. This lacunae thus calls into question some of the very understandings of development, democracy and citizenship the process of economic reform and the need to more properly situate them within the relation of forces that have guided the democratic transition.23 Economic Geography and Civil Society Before outlining the present study, one final theoretical point is necessary. My emphasis on reform forces within civil society is also strategic in that it seeks to show that the embrace of neoliberal policy design was not a straightforwardly determined outcome but has involved the participation of domestic forces and some very situated articulations of neoliberalism that can not be disentangled from the larger projects of democratization that have informed them. This is not to say that the role of global institutions and the pressures that they put on domestic reform are not important, but rather, that I will attempt to accord them a more appropriate weight in my analysis than has been the case in previous analyses which put the emphasis more strictly on the IMF and international institutions as opposed to the other political and social forces (cf. Chossudovsky, 2003; 23 Thus, the way in which these concepts have been articulated in political struggle is important for a critical understanding not just of developmental state reform but also for understanding how, in many ways, economic reform has been bound up with central concerns around Korean modernity. The debates on Korean social formation that animated much of the left in the 1980s are a good example of this concern, and were informed by the renewed development of Marxist thought in the 1980s (cf. Pak and Cho, 1989). A precursor of these debates included the ‘Autonomous National Economy Perspective’ of the 1970s that was influenced by dependency theory (Kim Soohaeng, 2007). The debate over the ‘developmental dictatorship’ (Lee Byeong Cheon, 2006) of the late 90s and early 2000s is perhaps the latest phase in these debates. Moon Seungsook (2005) also adds a feminist perspective to the debate over Korean Modernity in her Militarized Modernity and Gendered Citizenship in South Korea. 51 Harvey, 2004; Wade and Veneroso, 1998). Nor do I want to create a distinction here between foreign and domestic sources of neoliberalism, as such a distinction is difficult to make conceptually in terms of how the political space of state territoriality is in fact shaped (Agnew, 1995). Indeed local reform movements in South Korea have been shaped by strong transnational influences, as have the educational outlooks and policy aspirations of domestic bureaucrats, so this undermines any clear cut distinction between foreign and domestic. Rather, the focus on more locally situated reform actors here is really the product of political conjuncture in which perhaps more was possible. As discussed above, my focus on state and civil society departs substantially from the dominant perspectives on developmental states. Nonetheless, I think a theoretical perspective sensitive to both the insights of developmental state theory and to how state reform has been the result of strategic relations between state and civil society might help rejuvenate critical work on developmental state reform both within geography and other social sciences. As Jamie Peck contends, “the promise of a broadened conversation with economic sociology… [might be] a bolder and more purposive economic geography (Peck, 2005; 133).” The same argument can be made not just for economic geography but for other subdisciplines in geography that attempt to grasp the reconfiguration of economic space involved in divergent neoliberal trajectories. For example, economic geographers have been particularly sensitive to the spatiality of variegated neoliberalism through the study of state rescaling, and the transformation of business networks, but civil society is often downplayed as an important source of policy change – and one with its own variegated spatialities, I might add. This has not always been the case in economic geography. For example, the formation of regional class alliances and their 52 influences on local growth regimes was an important topic of study within regional economic geography in the early eighties and nineties (Storper and Walker, 1990), but has, in many ways, been replaced by a more explicit focus on intra-firm networks, clusters and creative classes (cf. Yeung, 2007; Peck 2005). One area where civil society is considered, somewhat, is in the state rescaling literatures (Brenner 2004), but the political and cultural aspects of hegemony also remain underdeveloped in this literature and, thus, its understanding of the spatiality of the state. Consequently, in some ways, this study might be read as a plea for bringing civil society back in to both economic sociology and economic geography. One area of sociology where the discussion of hegemony does take center stage is labour sociology, especially the variety of it advanced by Burawoy (1985). However, these studies tend to more commonly associate the politics of labour with the politics of strategic workplaces and few studies have attempted to examine labour’s participation and/or marginalization within civil society as an important manifestation of labour struggle, especially in East Asia (although there are a few notable exceptions to the rule, e.g. Price 1997; Gray 2008; Moore 2007). The politics of production are not absent from this study, but rather like the understanding of developmental states, I am expanding our notion of where labour politics takes place, beyond the confines of the factory regimes to the more complicated space created by the interaction of grassroots organizations, NGOs, community, national and transnational social movements, and individuals both within and outside of the state. In this way it also perhaps possible to retain a conception of workers and of labouring collectivities that is not strictly bound to the space of production where the term hegemony has been traditionally applied in labour sociology (Burawoy 1985). 53 This perspective has the potential to show how the demands of labour movements are connected to and articulated with other democratic demands and social struggles. Researching the Postdevelopmental State When I started my research in May 2006, I was curious to learn what role social movements had played in the process of economic reform and what sort of options had been proposed and suggested as alternatives to the policies of the developmental state. I was also curious how reformers and social movements conceptualized the old developmental state model, and policy areas such as the coordination of finance and industrial policy, and if there were any areas of state capacity that reformers might want to salvage as an alternative to neoliberal policy. It just so happened that many of the questions I was asking were also circulating amongst progressive intellectuals, democratic reformers and social movements against the wider backdrop of the crisis of Roh's participatory government and the twenty-year anniversary of the 1987 June Democratic Uprising. Through my personal networks and through my position as a visiting research fellow at the Democracy and Social Movements Institute at Sungkonghoe University I was thus able to interview a wide swath of intellectuals, activists, bureaucrats, and other actors involved in the reforms pursued by the liberal- progressive bloc. Many of these reformers had serious doubts about its outcomes and had begun to publicly voice criticisms of the current regime in advance of the December 2007 54 presidential elections.24 I was lucky enough to interview a number of them, as well a large number of activists, policy makers, and other actors within state and civil society. Most of the interviews conducted in the course of this research have been in English as many of my informants in Korean social movements have tended to be university educated activists. In addition to the wide variety of English-speaking activists in civil society, most unions and NGOs have international secretaries who speak English to communicate with other social movements. In addition, most migrant workers have some grasp of the English and, perhaps reflecting Korea's historical ties to the US, most government bureaucrats seem to have excellent English, as do a majority of intellectuals, so language was less a problem than I had anticipated it might be. In some cases, however, I used interpreters or my own intermediate Korean to conduct interviews. In many cases I have used the interviews to get a grasp of key reform projects and policy areas. Over the years I have developed a curiosity about the debates within Korean social movements. Where I have trouble with the language, or materials are not available in translation, I have relied on my Korean colleagues to keep informed on how these debates progress.25 In recent years articles about social movement and reform bloc 24 Between May 2006-April 2007 I conducted over 55 interviews with reformers, social movements, researchers, intellectuals and bureaucrats loosely involved in the liberal progressive bloc and policy areas explored in this dissertation (see Appendix 1). In addition to events and forums put on at Sungkonghoe, I also attended multiple demonstrations, press conferences, conferences, colloquia, and other public events including but not limited to the ILO regional meeting in Busan and meetings between the UN Special Rapporter on Migrants Human Rights and migrant groups. I was also involved in covering some of these events for a grassroots media project (interlocals.net) initiated by social justice and anti-globalization activists in Hong Kong and elsewhere in East Asia. 25 While some of the reformers that I interviewed in this study gave me verbal consent to cite them in the finished text (in some cases not until after the 2007 presidential election), I did not request that informants allow me to identify them as a criteria for setting up an 55 debates are available in translation through journals such as Inter-Asia cultural studies (cf. Shin Kwang Yeong 2000) and Korea Journal (Lim Hy Sop 2000) as well as from domestic English-language media and grassroots NGOs such as the Hankyoreh newspaper. And where they are not, published interviews, surveys of both the Korean and English language media and secondary literature, and attendance at protests, solidarity nights, and other events have filled me in on many of the trajectories of Korean social movements and reform politics. I do not pretend to have an exhaustive knowledge of the many factions, debates and internal disputes that animate the process of reform. However, I’m confident that my case studies do adequately express some of the tensions involved in economic reform of the Korean state, especially the subordination of demands for egalitarian reform to neoliberal economic policy. Outline of the Present Work Before launching into case studies, the next chapter revisits theories of the Korean developmental state in order to examine in more detail some of the theoretical reasons why a more relational analysis sensitive to the relations between state and civil society has been neglected within studies of Korean economic development. This is important not simply because civil society has been an active influence on reform strategies, but also because discussion of the way in which the developmental state has been understood by economic sociologists and heterodox economics will help me highlight some of the interview. Thus, I have chosen to keep all my interviewees anonymous. In many cases a particular reformer would give me copies of their own written work or point me in the direction of key debates that have been published and which I have cited here (without identifying whether or not I interviewed the person in question). The effect here creates something of an absent presence of some of the people I interviewed over the course of my research. They appear as textual voices rather than as transcripts. 56 areas of strategic economic planning as they have been understood in developmental state theory. This will be useful because Chapter 3 examines the reform of developmental finance, and attempts to show concretely just how the financial policies of the developmental state have been reoriented and some of the limits this has put on egalitarian reform. Chapter 4 also takes up this question of financial reform as well as redistribution in the context of reform priorities of the liberal-progressive bloc under the Roh Moo Hyun government and focuses more closely on the troubled coordination and conflict between reform politicians, civil society groups and the labour movement. The main focus here is on dissension among reformers associated with the ruling Uri government and the ways in which the priorities of the long decade of economic reform come into conflict with one another. I argue that these conflicts inform the crisis of Roh Moo Hyun’s “participatory government” and that a failure to articulate a political alternative to the division system and neoliberal economic reform, in many ways, explains the rising hegemony of neoliberalism (and, more recently, a neoconservative articulation of it) in South Korea. Chapter 5 shifts the focus somewhat from the more elite reformers to the participation of the labour movement in the process of economic reform, focusing on the failure of social cooperation politics. I argue that it is important to examine the historical- geographic trajectory of labour mobilization to better understand the factors that limit its participation in tripartite social cooperation at the national level, and why these institutions have been relatively unsuccessful as a forum for policy reform in South Korea. Chapter 6 continues to focus on the labour movement to show how the irregularization and transnationalization of the labour forces also presents challenges for 57 the labour movement and civil society. I examine how the gendering of irregular work and the articulation of migrant worker identity call forth new responses to the problem of labour exploitation. This chapter is important because it shows how the politics of mobilization at the grassroots level informs the way in which neoliberal hegemony comes to be challenged (or not) at other scales. Finally chapter 7 explores how some of the problems of coordination I describe in this dissertation can be expanded to the transnational scale. I do this through examining one of the ways in which nationalist understandings of democracy and development shared between civil and political society raise problems for understanding new forms of labour exploitation in the creation of a zone of transnational engagement between North and South Korea: the Kaesong Industrial Complex. In the afterword, I discuss the continuing recomposition of the Korean state and civil society following the inauguration of Lee Myung Bak in early 2008. In many ways, the success of Lee Myung Bak can be considered in light of the reform failures discussed in this dissertation. As a consequence, the political space for even liberal forces within civil society in the extended state seems to be under pressure. However, while some see the election of Lee Myung Bak as evidence of a return to a developmentalist orientation, I argue that beyond the mere discursive articulation of developmentalist projects, the Lee Myung Bak regime represents, in many ways, a continuation of the neoliberal model that was expanded during the long decade. Thus, I offer some concluding thoughts on how the politics of the long decade, and the subordination of substantive egalitarian to neoliberal reform that informed it, continues to influence the transformation of the Korean postdevelopmental state and the laboured search for an alternative to it. 58 Chapter 2: The State as Phantom Intentionality Yet the best proof of the fact that the thought of the bureaucratic thinker (penseur fonctionnaire) is pervaded by the official representation of the official is no doubt the power of seduction wielded by those representations of the state (as in Hegel) that portray bureaucracy as a “universal group” endowed with the intuition of, and a will to, universal interest; or as an “organ of reflection” and a rational instrument in charge of realizing the general interest. Pierre Bourdieu, Rethinking the State (1998, 38). We must take seriously the elusiveness of the boundary between state and society, not as a problem of conceptual precision but as a clue to the nature of the phenomenon. Rather than hoping we can find a definition that will fix the state-society boundary (as a preliminary to demonstrating how the object on one side of it influences or is autonomous from what lies on the other), we need to examine the… processes through which the uncertain yet powerful distinction between state and society is produced. Timothy Mitchell, Society, Economy, and the State Effect (2001, 77). It is only by conceiving the inscription of political domination in the material framework of the State as a condensation of a relationship of forces that we can break with dogmatic formalism of the kind; ‘Every state is a state of the bourgeoisie’, and grasp the complex role of political struggle in the historical reproduction of the State. Nicos Poulantzas, State, Power, Socialism, (1982, 158). The purpose of this chapter to provide a review of developmental state theory to show how civil society has remained a neglected and undertheorized category in mainstream developmental state research. Since I am trying to approach the reform of the developmental state in light of the reconfiguration of political space, it seems necessary to review how theories of the developmental state have attempted to fix the distinction between state and society. By overstressing the independence of the state (c.f. Koo 1993, 1-13), theories of the developmental states have made it difficult to study the process of 59 developmental state reform as the result of expansive interactions between a wide variety of social forces.26 There are, to be sure, many theories of developmental states but one thing that neo-Weberian and heterodox institutionalist perspectives that came to dominate the study of developmental states share is a problematic conception of the state as static entity autonomous or external from society. While state-centric theories of East Asian growth have shown how state intervention can solve problems related to imperfect information, transaction costs, and scarce resources, there is a lack of an analysis how state intervention is embedded in conflicts and coordination between multiple, and not just simply elite, social forces. In other words, by neglecting civil society, developmental state theorists have largely theorized away social conflict in their models and thus cannot situate developmental state reform in such a way as to include, in a critical fashion, forces outside of the state bureaucracy. The state bureaucracy remains the locus of decision making in their models. Since the state here is conceived through the fiction of a coherent intentionality, there remains no way to examine the multiple conflicts that condition state planning as well as the way in which dissension and conflict within the state itself influence developmental policy. The sources for this problem, I argue are to be found in the way in which the concept of the state has been approached in post-war social science and, in particular, in the way in which theories of state autonomy have been applied by Neo-Weberian sociologists to explain the success of East Asian states in fostering economic development. Understanding this problem will entail revisiting a few crucial debates in 26 To be clear, I am not trying to assert that the “state” did not play a role in late development; rather I a simply interrogating the foundation under which the state came to be understood, and how this understanding obscures a more relational analysis. 60 post-war state theory, in order to show in more detail just how the categories of developmental state theory have developed. The purpose of this investigation is to better situate developmental state theory within debates about the state, as well as about particular areas of economic policy that I have yet to discuss in detail, and to show how it emerged from a larger relational consideration of the state that provides some of the building blocs for the perspective on the integral state that I introduced earlier. My hope is that by theoretically unpacking some of the assumptions of developmental state theory it will be easier for economic sociologists and heterodox economists, not to mention geographers, to better situate their analyses of developmental states and existing areas of state capacity amongst a wider variety of social forces. In this way, social conflict and the creation of hegemony can be considered as a dynamic influence upon the model rather than, as is the case, simply aspects of social relations that the state must be autonomous from in order to be considered a developmental state. Neo-Marxism and the Return to the State The theory of the developmental state is closely tied to a larger reconsideration of the state as an object of scholarly research that emerged within the work of a number of influential Anglo-American social scientists in the late 1970s and early 1980s. In particular, these scholars were interested in the role of the state in social and economic transformation and they rejected the dominant systems approach of post-war American social science as a framework too limited for examining the role of the state. They also expressed discontent with existing pluralist, structural-functionalist and Marxist accounts of the state as well (Jessop 1990; Mitchell 2001). The systems-based approach considered 61 the state as a concept too ideological for theoretical elaboration, and preferred instead the concept of “political system.” However, without a viable concept of the state, it was difficult to discern either the specificities of particular institutions or to discern where the exact boundaries of the political system began and ended, as the state seemed folded into a society with no boundaries, and/or reduced to particular sets of cultural and socio- psychological traits (Mitchell, 2001; Jessop, 1990). For scholars interested in the comparative institutional and policy orientation of different states, and especially the capabilities of some states to effectively manage economic development and the inability of others to do so, discovering a more appropriate conception of the state suitable their concerns became a priority. They found certain aspects of it in some of the neo-Marxist debates about the state from the 1960s and 1970s. While the subject of the state was never, particularly, off the agenda in Marxist research it remained an underdeveloped until the late 1960s and early 1970s in both Western Europe and North America.27 During this time, separate trajectories of research on the state emerged in England (Miliband, 1969), France (Poulantzas, 1973; 1980), 27 The work of Harold Laski, Ralph Miliband’s supervisor, has a direct pre- and post-war continuity. The analysis of bureaucracy by the French Socialism or Barbarism group under Cornelius Castoriadis as well as the early analysis of the state by the post-war Italian new left through thinkers such as Negri and Tronti and their writings on the crisis of the planner state (cf. Negri, 2005) also foreshadowed some of the latter debates over social expenditure and class struggle that would occupy the work of a number of American state theorists such as James O’Connor (1973), Erik Olin Wright (1983) and Samuel Bowles and Herbert Gintis (1976). While these thinkers were occupied with figuring out why state actors came to play a particular role in economic development, especially in the USSR and Western Europe where “planning” had produced new class relationships, they were not concerned with distinguishing the state from society. Their work generally fell under the category of neo-Marxism as they broke with orthodox Marxism and economic determinist understandings of the state (cf. Laclau and Mouffe 1985), attempting, instead, to introduce a more critical and contingent approach to the cultural and political dimensions of capitalist societies. 62 Germany (Offe, 1975) Sweden (Therborn, 1978), and North America (O’Connor, 1973). These were in many ways provoked by British political theorist Ralph Miliband, in particular his book The State in Capitalist Society (1969) and the lively debate it provoked in the pages of the New Left Review between Miliband and the France-based, Greek philosopher Nicos Poulantzas. Discontented with the systems framework dominant in political sciences during the 1950s and 1960s, Miliband set out a theory of the state that argued that it was a cohesive instrument of class domination rather than simply of rotating and interchangeable sets of plural interests. He did this by borrowing some of his friend C. Wright Mills’ ideas about the power elite and argued that the existence of pluralism did not rule out the existence of a ruling class. To do so, Miliband empirically demonstrated that the political elite is concentrated in the ruling class itself and benefits not simply from its concentration of capital but also from the consistent yielding of state power to their class interests. In subsequent scholarly exchange over the importance of Miliband’s work, this approach was subsequently termed “instrumentalist,” in that the capitalist state is taken by Miliband to be a more or less direct instrument of class rule. While, certainly, the power elite was seen as something that shifts between civil society and the state, a more complex analysis of processes of conflict and hegemony was in many ways absent in Miliband’s work. Nonetheless, the effect of Miliband’s work was thus to put the study of class back into state theory after something of a long recess during the McCarthy years. However, path-breaking though it was, Miliband’s work quickly garnered criticism from Poulantzas, who pointed out some of the strengths of the book but regarded Miliband’s conception of the state as theoretically underdeveloped. In general, Poulantzas found 63 Miliband’s work to put forward an account of the state that attributed it too directly to the class power and managerial prerogatives of particular individuals. For Poulantzas, the relative autonomy of the capitalist state was reflective of the leadership of a hegemonic class that enabled the state to organize and unify the bourgeoisie and the dominant power bloc. This was necessary, Poulantzas believed, because no single fragment of capital could organize the rest in a hegemonic fashion. Rather, the state was needed to safeguard the interests of the hegemonic class as a whole and the forms of production and juridical discretion from which they benefited. This did not necessarily mean that the state would refrain from intervening in ways that contested the interests of particular capitalists. Rather, it was the case that, historically, the state ensured that continuation of the general relations of capitalist production through utilizing its relative autonomy in relation to other social actors when necessary. In the words of O’Connor (1973), the state was involved in both accumulation and legitimation, and this made it a site for popular struggle. This argument became influential in social science research and was later echoed somewhat in geography by Gordon Clark and Michael Dear (1984). Miliband (1970), however, took issue with Poulantzas’ formulation of the theory of relative autonomy, arguing that the concept tended toward a “structural super- determinism” (cf. Laclau , 1979, 51-80) that lacked a solid empirical framework and thus tended to obscure the dialectical relationship between state and the economic system as well as the important differences between actual historical states. If the state was thought of as strictly safeguarding the interests of a capitalist class merely as a function of class rule what difference did it matter if the state took the form of a parliamentary state or of authoritarian “Bonapartism”? Miliband, perhaps unfairly, argued that Poulantzas’s early 64 work obscured the difference by keeping his theory free from empirical elucidation. However, by the time of this interchange, which took place in the New Left Review, Poulantzas had already produced a lengthy treatise on fascism and dictatorship that clearly outlined the differences between these state forms and parliamentary liberalism in his analysis.28 The problem for Miliband was perhaps that Poulantzas's project was aimed toward a generic conception of the capitalist state which linked his concept of relative autonomy to both the separation between manual and mental labour inherent in capitalist relations of production, and to the specificity of “classes and class struggle under capitalism” (Poulantzas, 1980, 172). This was done without sufficiently examining the contours, until later stages of the debate, of actual capitalist states. Thus, Poulantzas's theory of the state seemed to echo for the British Marxist Miliband, the Althusserian notions of “determination of in the last instance by the economic” (Hall 1986; Laclau 1979) and therefore lacked the open, relational construction that a more historical approach to capitalist states might offer. Ironically, this a similar problem to that encountered in later applications of the state autonomy thesis by neo-Weberian theorists. However, as Hall (1980b) indicates, it would be wrong to tar Poulantzas with the problems of Althusserianism as his later work moved toward a break with much of the abstract formalism and base/superstructure topography advanced by Althusser and Balibar (1970). 28 Newman (2002) argues that the later stages of the Miliband/Poulantzas debate were inflected more by hurt feelings (both had summarily dismissed each other’s work in the pages of the review) than rigorous critique. 65 Though certainly Poulantzas’ early work tended towards abstract description of state autonomy, in his later work the relative separation of the state from the mode of production was the result of a historical process, and not determined a priori. This focus on the historical materiality of states was undoubtedly influenced by Foucault and his attention both to the practices of micro-powers and to the absorption of these techniques in the macro-governmental strategies of particular states (Jessop, 2008). However, at the same time, Poulantzas’s work can also be seen an appropriation and critique of Foucauldian ideas. In many ways, Poulantzas formulation of the state as a “material condensation of a relationship amongst forces” was an attempt to combine these insights into a theory of the state that included both state practice (techniques of power) and process (popular struggle and contestation). As Kristin Ross (2004) points out, already by 1977, French intellectuals such as Poulantzas, Rancierre, and others, were beginning to criticize the analysis of techniques of power which “by presupposing it as always already there, persevering in the face of the equally persevering guerrilla action and resistance tactics of the masses” serves to “avoid the real question posed by power, namely whom it serves and to what purpose” (Revoltes Logiques 1977 as cited in Ross, 2002, 127-8). Poulantzas sought to create a productive tension with Foucauldian ideas by examining state practices such education, individuation, and the establishment of legal norms and procedures as conditioned by the arrangement of different social forces and social struggles29 – though, it must be said that gender selectivity of state and civil society 29 This point is very much at the heart of the approach to the state that I take in this dissertation. This is not to say that Foucault was not interested in social struggles, and in his later work he seemed to regard resistance as an important, constitutive aspect of power relations. However, where I tend to make distinction between Poulantzas, as well as my own work, and Foucault’s is in how much resistance can be thought of as 66 remained underdeveloped in Poulantzas's work as well as other state theorists in the 1970s (cf. Del Re, 1996). Thus there is a tension here between the description of state practices, very much in the Foucauldian tradition and often treated as individual moments of power relations, and a concern with political and economic processes which condition the relative autonomy of the state and which are embedded in larger economic trajectories and the interaction between popular struggles and the state. Poulantzas was thus trying to create a theory of the state that was contingent historically on a variety of social forces and institutional machinations. The contours of actual states would need to be elucidated in particular historical conjunctures if the particular social forces that constituted them were to be revealed and the dynamics of state strategy explained. Poulantzas’ theory can be regarded as a reworking of the Gramscian notion of the extended or integral state (political society + civil society) and the historical bloc – the key starting points for any exploration of hegemony (Gramsci 1971, Sassoon, 1980) such as the one advanced in Chapter 1. Thus, it was clear by the late 1970s that the state was back on the agenda for empirical research, and that the historical configuration of the state autonomy would be a major subject of inquiry. However, the way in which the theory of state autonomy was incorporated into economic sociology neglected many of the subtle, relational aspects of Poulantzas's theory of relative autonomy. The focus on situating the state within a social space of popular struggles was neglected in favor of a more external relation between state and society, immanent to discursive and juridical power and how much it is related to larger trajectories of social struggle and relations of force. I would say Foucault’s approach is oriented toward a more immanent critique of discursive power, whereas I am trying to account for the influence of a longer trajectory of social struggle on the configuration of reform politics. 67 one that was governed largely according to an assumed and coherent intentionality existing on behalf of the state. Bringing the State Back In The idea that the state can play an organizing and unifying role in capitalist society if it is relatively autonomous of given class fractions and of various particular interests of dominant classes was an attractive proposition for neo-Weberian theorists interested in the role of the state in economic and political development. They saw development as a process in which the state had been an important actor, especially in the post-war period but also across different historical epochs from revolutionary France, China and Russia to new deal-era America and pre-WWII Northern Europe (Evans et al, 1985; Skocpol, 1979). However, these scholars considered the neo-Marxist theory of the state as too “society-centered” and preferred to see states as distinct from society and thus as unique subjective actors in their own right (Mitchell 2001; Koo 1993). As Theda Skocpol wrote in Bringing the state back in, Neo-Marxists have, above all, debated alternative understandings of the socio- economic functions performed by the capitalist state. Some see it as an instrument of class rule, others as an objective guarantor of production relations or economic accumulation, and still others as an arena for political class struggles. Valuable concepts and questions have emerged from these neo-Marxist debates, and many of the comparative and historical studies to be discussed here have drawn on them in defining researchable problems and hypotheses. Yet at the theoretical level, virtually all neo-Marxists writers on the state have retained deeply embedded society-centered assumptions, not allowing themselves to doubt that, at base, states are inherently shaped by classes or class struggles and function to preserve and expand modes of production (Skocpol, 1985, 5). Removing the concept of state autonomy from its “society-centeredness,” neo-Weberian scholars re-introduced it in the social sciences through the now classic work of state 68 theory Bringing the state back in edited by Theda Skocpol, Peter Evans and Dietrich Rueschemeyer (1985). This work initiated, in many ways, the return to and modification of Weberian theorizing about the state that influenced important studies of developmental states. However, the externalization of state from society in these analyses would later come back to haunt the state autonomy thesis (cf. Cumings, 1999). In contrast to neo-Marxist theories of relative autonomy, neo-Weberian scholars downplayed the role of hegemonic leadership and class struggles and instead cast state autonomy not just as autonomy from particular dominant class interests, but from classes and society in general (Skocpol, 1985). Autonomous states were seen as “organizations claiming control over territories and people” that may ”formulate and pursue goals that are not simply reflective of the demands or interests of social groups, classes, or society” (Skocpol, 1985, 9). Although neo-Weberian scholars did not regard this autonomy as a permanent construction, they narrowed the sources for it to those groups which comprised the state bureaucracies as a unified, corporate body, and thus they identified the sovereign power of the modern nation-state with its internal organization, especially its key decision making bodies. The state was thus regarded as distinct from societal groups, and, in fact, maintained powers of selection and resource mobilization that could shape society. This was distinct from the neo-Marxist theory of Poulantzas. For him, the personnel within the state did have room to coordinate and sort between the interests of the dominant classes and popular struggles, but at some point the capacity of the state was seen as relative to, or co-constitutive of the interests of strong ruling blocs and factions, and the oscillations of power within and between these groups were reflected in materiality of the state and the composition of its personnel. 69 Armed with the wider appreciation of the role of the state in continuity with post- war development economics, these neo-Weberians scholars portrayed the state as an actor involved in economic transformation in its own right. These theorists quickly earned the label ‘neo-Weberian, for, as Evans (1995, 30) pointed out, “Weber’s state is an essential adjunct to private capital, but not a transformative agent in its own right.” Thus, with a theory of state autonomy to call their own, a number of the theorists who “brought the state back in,” so to speak, began to stake out an empirical terrain in the study of the economic strategies of East Asian states. In this they were also joined by institutional economists (cf. Chang 1996) who had similar interests in showing how markets do not necessarily coordinate themselves. These economists believed that targeted state intervention could provide a pathway to development by nurturing infant industries, lowing transaction costs and facilitating the flow of information. However, much like the neo-Weberians, institutional economists lacked a critical conception of the state that could situate it in time and space, as their analysis was primarily oriented toward showing how states could solve problems that free markets could not. Thus the state and the market were also considered as topographically external to each other, and much of the argumentation around the role of the state was about whether or not it could simulate or govern the market. Thus, both institutionalist and neo-Weberian accounts of the state had difficulty situating the state within social relations of power, class, and conflict, tending to see it as something outside of society (Fine, 1999; 2006). 70 The Developmental State The neo-Weberian theory of the developmental state (an application of the state autonomy theory to East Asian development) fashioned itself as a rival to neo-classical studies of East Asian economic growth that stress markets and competition. Instead, developmental state theorists provided a detailed empirical description of the economic policies carried out by the elite economic bureaucracies of countries in the East Asian region, which stressed high levels of state intervention and coordination. Chalmers Johnson’s (1983) study of the contribution of the Japanese state and, in particular, the Ministry of International Trade and Industry (MITI) to both pre- and post-war Japanese economic growth was perhaps the originary work of developmental state scholarship. Johnson’s study in some ways perfected both the methodology and much of the theory used in later economic sociology studies of developmental or “plan-rational” economic policy – as Johnson preferred to call it. Johnson saw meritocratic bureaucracy as a source of coherent economic planning, and examined the career pathways of bureaucrats through various ministries showing how their tight sense of identity and knowledge of strategic resources enabled them to effectively plan Japan’s post war economic recovery. Johnson’s book quickly became a landmark study in the neo-Weberian literature on the state and anchored much of the debate about the role of the state in an empirical body of work focusing on East Asia, as opposed to world systems and dependency theories, which were mostly based in Latin America. The latter theories saw the state as more constrained in what it could accomplish by imbalances inherent in the world system. The East Asian focus of the developmental state approach was quickly substantiated by other empirical studies based in East Asia, especially South Korea and 71 Taiwan, undertaken by development economists interested in the role of the state (cf. Amsden, 1989; Wade, 1990; Woo, 1991; Chang, 2000). These studies had the effect of undermining the dominant neo-classical framework and provided support for industrial policies that attempted to intervene in the market to generate economic growth. Up until this point, neoclassical economists had conceded little ground to state planning and where they had acknowledged state intervention in East Asian development it was in ways that attempted to downplay its potential. For instance, Wade (1990) discusses the “simulated market” theory of neoclassical trade economist Jagdish Bhagwati, who tended to suggest that state intervention was geared towards creating export prices for goods by providing incentives for them to be priced only marginally lower than imports. This was seen as correcting against a preference for ISI and the domestic market by encouraging export growth. However, for neoclassical economists like Bhagwati, this kind of export promotion policy was seen as lesser evil than import substitution policies, that to his mind would have entailed higher levels of state intervention (Wade 1990, 15, 22-23). But, as Wade argues, these economists did not deeply analyze state policies in the area of finance or in other areas of the economy beyond trade policy. In contrast to neoclassical economics, studies of developmental states provided strong arguments as to how state intervention had succeeded in producing rapid economic growth, especially by using its autonomy over financial resources (Woo, 1991) and distorting some (primarily domestic) markets while conforming to the rules of others (international markets). In this way, the state was able to move industry quickly up the value ladder from light manufacturing into heavy industries by allocating scarce capital to infant industries in return for performance-based or “plan-rational” indicators 72 (Johnson 1983) of economic growth such as the expansion of export markets and the increase of domestic production, rather than the profitability of individual firms per se (cf. Woo 1991). Moreover, outright government ownership of strategic industries was also practiced in particular industrial sectors such as steel and petrochemicals where private initiative was considered lacking in both skills and technology required to initiate development (Amsden, 1989). Developmental state theorists and institutional economists showed that the state had gone much further than simulating markets, it had actually “gotten prices wrong” (Amsden 1989) and distorted or repressed particular segments of the market. Thus the state was much more interventionist than neoclassical observers were prepared to let on. Japan, South Korea and Taiwan came to be considered as almost perfect cases in these regards. In each of these countries, governments had used effective industrial policy and state intervention in the market to produce rapid, export-oriented industrialization, cultivating strong inter-firm and international economic networks in the process. Where neoclassical observers had stressed market competition and private initiative, neo-Weberian sociologists and institutional economists were able to show how strongly motivated state actors had formulated their own initiatives and had controlled scarce resources like investment capital by limiting competition and channeling resources to selected firms. Accomplishing these tasks was by no means easy. Strict control and even repression of the financial market was needed for the state to channel monetary resources to exporting firms in order to tap the developmental potential that came with access to export markets, foreign exchange and technology (cf. Amsden 1989, 139-155; Woo 1991, 159-176). To maintain control over these resources and thus state capacity in 73 economic development, neo-Weberians observed that a state with a strongly unified, and professionalized economic bureaucracy – conditioned by a strong meritocratic selection process as well as the influence of strong school, regional, and familial ties – had been present and had exercised the foresight and clarity to govern the market without falling prey to the interests of individuals or particular social groups (cf, Johnson 1983). The State as Phantom Intentionality While developmental state theorists provided rigorous empirical research into many of the policy instruments that East Asian states used to allocate capital for development and coordinate economic interests – thus challenging neo-classical explanations of growth by going beyond market-based or minimal state approaches and showing how intervention had contributed to high-growth economies – the concept of the state itself employed in these studies remained identified not with the ensemble of social groups and practices that produced “development.” Rather it was identified as a sui generis construction that had arisen out of tight, elite networks of affiliation as well as historical practices of planning. Johnson’s (1983) study of the Japanese economic ministries in particular reads almost as a yearbook of bureaucratic lineage, while Woo’s (1991) study of Korean development traces industrial policy back to post-war bureaucrats who emulated colonial- era policies. By identifying the state with meritocratic and status-based forms of affiliation and reading industrial policy off of their cohesion, rather than situating these networks recursively in relation to wider social struggles, the developmental state came regarded as a subjective interest of its own: a developmental state, whose agency was located primarily in the economic decision-making bureaucracies. Without a theory of the 74 social diffusion of ideas between different interests groups, or a theory of how the state responds to social conflict, both neo-Weberians and institutionalists seemed to attribute to the state a phantom intentionality. The ideational frameworks and strategic practices embraced by bureaucrats could not be examined in relation to the wider relations of conflict or coordination within social space, including those conflicts and tug of interpersonal loyalties that affect and fragment political society. This created a number of methodological problems as it became difficult to explain actual institutional processes whereby state and private interests had interacted to produce development. Instead, state theorists seemed to maintain what appeared to be an externalized and often antagonistic theoretical distinction between state and society, with societal interests often regarded as predatory (Mitchell 2001). As Jayasuriya (2005) points out, when the core capacities of developmental states, such as control over finance, actually began to be restructured, the neo-Weberian research paradigm could not account for the sources of such restructuring except as policy error. They had no way to discuss the relational underpinning of the transformation of developmental states because their theory had been based on demonstrating the autonomy of the state vis-a-vis the market through control of strategic resources. In Jayasuriya’s view, this amounted to an “institutional fetishism” which viewed institutions outside of the social forces, class relations, and multiple interest groups that condition them. This is not to say, however, that the work of developmental state theorists was immune to such criticism, but that their theory, even in its more subtle formulations such as Evan’s “embedded autonomy,” discussed below, could not break out of the state-society binary which it had helped establish. 75 For developmental state theorists, the state exercised autonomy over society through the corporate coherence of its decision-making bureaucracies — Cumming’s (1999) “Spider with no web.” They were very hesitant about acknowledging the fact that the state might be an actor just as conditioned by conflicting societal interests as other social groups and organizations. In practice, however, most studies, including even the pioneering studies of developmental state such as Johnson’s MITI study, let on to some degree that the elite networks that conditioned the state bureaucracies had some recursive effect with business and political interests, yet this point remained theoretically underdeveloped. For Johnson (1983), the interconnection of elite bureaucratic networks with industry through retirement of previous generations of bureaucrats into industry was cited as a nexus of tight state-business connections that complemented state planning by providing valuable means of communication and awareness of ministry plans. However, Johnson and others did not include room in their theoretical description of state autonomy for describing exactly how societal interests may be worked into the state personnel other than as merely an external support mechanism. The question was really how deeply within the state apparatus those goals might be shared or, if in conflict, how they might be overcome. Without the kind of integral and relational notion of state and society implied in the concept of hegemony — “consent armored with coercion” (Gramsci, 1971) – and the historic bloc, this was a difficult question for neo-Weberian theorists to correctly answer. 76 Qualifying State Intervention Korean scholars, as well as some Marxist scholars interested in debates about Korean political economy, have been much more leary about ignoring the social conditions of state power in their own accounts of Korean development. Cho Hee Yeon ‘s (2000) analysis of the Korean “developmental regime” (cf. also Cho and Kim, 1998) and Lee Byeong Cheon and others’ (2006) theory and analysis of “developmental dictatorship” both adapt a more recursive view of state and society in their studies. Eun Mee Kim (1993), for example, has argued for a more recursive view of the interaction between the domestic conglomerate sectors and the state bureaucracies, showing how even in the strongest period of state-led growth during the 1970s, the corporate sector provided some of its own initiatives, particularly in the construction industry. Vivek Chibber (2003) has also contributed to this debate by showing how Korean firms in the early 1960s had their own networks with Japanese firms that could complement the government’s strategy of export-led growth. This was unlike the situation that pertained in other countries such as India, where Chibber argues that domestic business groups lacked the external orientation necessary to create a coalition for export-led growth and instead opted for import substitution industrialization. Cho and Kim (1998) show how land reform, a goal fought for by social movements both during and after the period of Japanese occupation, was an important precondition and social compromise for the expanded autonomy of the state in the industrial sphere. By responding to bottom up movements by carrying out top-down land reform and agrarian mobilization through the Sae Maul movement (cf. Cho and Kim 1998; Kim Sam-soo 2006, 173-4), the Park Chung Hee regime was able to partially consolidate its hegemony and generate support for its policies amongst small farmers. 77 This enabled the state’s structural capacity to implement reforms in other sectors by granting it political legitimacy. Thus, social movements, in many ways, influenced the economic spaces later targeted by the state. Choi Jang Jip (1989), for example, shows how nascent industrial unionism had been constituted in the textile industry in the 1950s and 1960s due to effective agitation by workers, and how these workers’ gains had the effect of institutionalizing bargaining procedures at the enterprise and industrial level for some sectors. This helped facilitate the government investment in the textile industry, by creating industrial standards, even if, later, these would eventually become just a formality under the Yushin system of heavy industrialization. The point is that, in these cases, a more relational interaction exists between the state and social forces in the constitution of developmental strategies than has been accounted for in developmental state theory, which tends to embrace a more unified conception of the state as the source of policy and structural capacity, and attribute a smaller role to social conflict and class alliances. It is also important to mention that an integral notion of the state implies an analysis not only of those areas where consent and cooperation are important but also where consent could not be generated and coercion is utilized instead. For example, though the Korean government acceded to pressures from below for land reform, it was able to effectively exclude pressure for political and economic reform from communist and even moderately left wing political parties in the inter-war period (Choi, 2005). This is a dynamic that continues throughout the developmental period with governments selectively responding to popular movements by either repressing them or redoubling their efforts at economic growth. The interests of the labour movement are perhaps the 78 best illustration of this process. Workers were often kept highly regimented in the workplace and few forms of redress were available to workers by way of labour unions and the law (Janelli, 1993; Choi, 1989; Hart-Landsberg 1993, Deyo 1989; Koo). Further, the repression of independent trade unions and other independent political forces made incorporating labour’s interests into developmental policy difficult outside of the provision of low paid jobs through the industrialization facilitated by government policy. The same could be said for domestic civil society: it was tightly surveilled and activists were often imprisoned or worse for organizing in the public sphere (cf. Presidential Truth Commission on Suspicious Deaths, 2004). Gender relations were also highly uneven and informed by state violence, with, in the words of Moon Seungsook (2005), women marginalized in production and men mobilized to be martial and productive family providers through government mobilization. The problem with the neo-Weberian theory of state autonomy, when it came to such issues, was that there was never a straightforward commitment to examine the dialectic of incorporation and exclusion, coercion and consent, involved in the formation of developmental politics. It is also possible that there are further historical and geographical reasons for this omission. The continuity of state organization between Japanese Imperialism and the post-war Korean state might be one reason for a statist perspective, for a similar continuity cannot be found for civil society in this period. Social movements remained active but generally subaltern during the colonial period and while civic association spread during the inter-war period, many of these were repressed by subsequent regimes. If relatively institutionalized forms of civil society in the form of political parties have remained passive or suppressed during the dictatorship years the same cannot be said for 79 social movements, or even social mobilization by the state. On the contrary, modern Korean history seems to be replete with periods of mobilization and repression, with high points reached when several popular uprisings from below forced political changes in 1960, 1979-80 and 1987. My point here is that the predominance of state power over civil society should not let theories of the developmental state off the hook for neglecting the role of social movements and civil society in their studies. The relatively muted character of civil society in the developmental period should not have been taken as absence. Instead, if a number of developmental state theories had sought to explain the sources of coercion and conflict that constituted many developmental policies and the opposition that these created, then perhaps these studies would have been able to identify some of the conflicts that later led to demands for developmental state reform. While it may have been easy for developmental state scholars to neglect domestic civil society, as perhaps the repression of domestic social movements could be demonstrated as evidence of autonomous state, it was harder for them to demonstrate the state’s autonomy from international forces. However, methodologically, developmental state theorists tended to confine their analysis of state autonomy more strictly to domestic forces and thus neglected larger transnational connections within the global political economy. These forces included cold-war anti-communism, and the endorsement of Bretton Woods institutions and modernization theory by the foreign policy establishment. These forces informed the structuring of global growth and regional demand through the influence of consumer demand in the US market (cf. Jayasuriya, 2005; Han, 2005), which were key factors behind individual states’ ability to pursue export industrialization. The omission of these forces amounted to a kind of methodological territorialism that assumes 80 that states are primarily oriented toward domestic actors (Glassman, 1999). This is the sort of problem that fuels single country comparison30 of developmental indicators in comparative work on developmental states, tending to ignore that larger international contours in which states are situated. The Theory of Embedded Autonomy Perhaps the most sustained attempt to respond to criticisms of the state autonomy thesis was made by Peter Evans who attempted to revise the theory in order to better take account of societal interests through the concept of embedded autonomy. Evans argued that developmental states could be embedded in societal interests but in such a way as to also secure them a high certain degree of autonomy: or “spiders within webs” to use Cumming’s (1999) short form once again. The internal organization of developmental states comes much closer to approximating a Weberian bureaucracy. Highly selective meritocratic recruitment and long-term career rewards create commitment and a sense of corporate coherence. Corporate coherences give these apparatuses a certain kind of “autonomy.” They are not, however, insulated from society as Weber suggested they should be. To the contrary, they are embedded in a concrete set of social ties that binds the state to society and provides institutionalized channels for the continual negotiation and re-negotiation of goals and policies. Either side of the combination by itself would not work. A state that was only autonomous would lack both sources of intelligence and the ability to rely on decentralized private implementation. Dense connecting networks without a robust internal structure would leave the state incapable of resolving “collective action” problems, of transcending the individual interests of its private counter-parts. Only when embeddedness and autonomy are joined together can a state be called developmental (Evans, 1995, 12). In other words, the state remained a unified subjective entity but behind a developmental state there would need to be a developmental coalition capable of supporting and 30 This procedure itself seems to shape much of the comparative institutional literature of late development and not simply Evan’s work (cf. Waldner, 1999). 81 implementing state policy. Evans thus contrasted developmental states, which shared the features of autonomy and support necessary for developmental policy with what he described as predatory states. These are states in which individual interests seemed to prevail and hinder wider societal direction and support for state policy.31 Though an improvement upon earlier work, this definition of state autonomy still remained somewhat less nuanced than the criticisms of it. There were strict limits on how to understand how societal interests might be integrated within the state, not to mention the social constitution of the economic bureaucracy itself. The state still had to be regarded as an insulated actor, but the social actors supporting it could be seen as more varied. Bureaucrats were not considered to be social actors, in the sense of being shaped by class and other power relations; instead, they continued to be seen on the basis of corporate affiliation and elite status alone. This limited the degree to which state actors could be seen as being involved, with other actors, in the creation of a hegemonic politics of development. Evans separated all talk of state capacity in development from talk of political legitimacy. The former had to be identified with the coherence and autonomy of the bureaucracy, the latter was a separate question. For some, such as Castells (1992, 56), the decision to base legitimacy on promoting and sustaining development is what defines states as “developmental.” The problem with this definition is that it conflates a desire to build legitimacy on this basis and the ability to do so. Many states might wish to use development as a basis of legitimacy but are unable to produce necessary results (Evans, 1995, 257 n. 29). 31 “Predatory states lack the ability to prevent individual incumbents from pursuing their own goals. Personal ties are the only sources of cohesion, and individual maximization takes precedence over pursuit of collective goals. Ties to society are ties to individual incumbents, not connections between constituencies and the state as an organization. Predatory states are, in short, characterized by a dearth of bureaucracy as Weber defined it” (Evans, 1995, 12). 82 Therefore any degree of dis-unity and conflict within the state apparatus was still taken to be a symptom of the penetration of the state by individual interests rather than an actual institutional process of hegemonic construction. The state remains fetishized as a phantom intentionality.32 This is the closest we get to a theory of politics within Evan’s work. Societal interests are regarded as necessary for development but there is no sense of how other social forces are incorporated or elided from participation in developmental coalition either theoretically or empirically. This limits the ability of the perspective, especially after democratic transitions, to more fully examine the forces conditioning state power. Instead neo-Weberians continued to look for reasons this rationality was undermined. Methodologically, the role of labour and oppositional movements in reforming developmental states remained unexamined unless, post facto, their participation could be assimilated to assumptions about the corporate cohesiveness of the state: labour interests could either led to predation or they could be a member of the developmental coalition (cf. Evans 1995, in particular his discussion of Austria). The processes whereby 32 Like the other neo-Weberians, Evans continues to understand the state as a rationality based on educational and elite status, and doesn’t look much farther. I prefer to see the state as merely a region of social space. Although it may play a structuring role, this role does not stand outside some distinct totality called ‘society.’ The state is bisected by a variety of intentionalities emerging from a variety of contingent sources (democracy movements being important here) and processes (capitalist development but also wider sets of power relations). Rather than merely being a science of statecraft (saying what the state can and cannot do), state theory, if there is to be one, should perhaps begin from actual existing intentions, in the form of democratic demands, and attempt to show how they reshape space. This might decenter the myth of the state as self-interested actor, a myth that much modern political science is dedicated to upholding through myriad taxonomies (failed states, rogue states, liberal states, etc), and perhaps lead to a more complex and less instrumental understanding of the societal relations that structure different moments of juridical and institutional power. 83 interactions between political and civil society actively mediate social conflict or advocate new forms of regulation or developmental policy are left undertheorized.33 Hart argues that without a more critical examination of hegemony, Evan’s notion of embeddedness remains rather flat, missing even much that was implied in the original Polanyian concept of the “double movement” that most neo-Weberians cite as a main source of influence on the development of the concept of embeddedness (Hart, 2004, 2002; Granovetter et al, 2004). In the Polanyian sense, the double movement is the result of a social reaction against the expansion of the market, leading to protective social institutions where possible. However, for Evans, societal interests are not seen as embodying a response to the expansion of the market but are rather simply an adjunct to the state’s interests. Thus, we are left wondering what happens when a range of responses, from contestation to compromise, interact with the state. Rather than an analysis of the range of social forces involved in the conflictual processes we are only left with an analysis of those that act as support for state planning. Conclusion: Bringing Hegemony Back In What I have done in this chapter is to try and show how, theoretically, civil society has remained relatively undertheorized in the frameworks adopted by different theories of the developmental state and suggest that this poses certain problems for understanding how interaction between state and society affect the trajectories of state policy. This is 33 This does not necessarily mean that neo-Weberian theorists needed to embrace a Gramscian perspective to understand these problems. Even liberal political thinkers such as Gobetti (2000) and Bobbio (2002) have attempted to put forth theories of civil society and state capacity that can sufficiently address the role of social conflict in the development of state institutions, especially in regards to areas of legal transparency and accountability. 84 important to understand because in order to examine how state capacity has been transformed in South Korea and other developmental states, it will be important to more critically situate these transformations in terms of complex interaction between a wider variety of social forces than simply state bureaucrats and developmental coalitions. I have already argued that methodologically the lack of a focus on relationships between state and civil society limits understanding of the transformation of the Korean developmental state, especially in the lead up to the 1997 crisis. In this chapter I have tried to show how this problem has been informed by much deeper assumptions about state autonomy that have been part and parcel of the frameworks embraced by both neo-Weberian and institutionalist approaches to Korean development. This is not to say that these theories have not been of some value in highlighting important areas of state policy and the way in which state intervention has been used to encourage economic development. However, the way in which the state, market, and society have been conceptualized as external to each other raises particular problems when trying to situate state capacity in a strategic and relational manner, as an outcome of complex relationships between social actors. The neo-Marxist approach to relative autonomy discussed above provides many of the building blocks for a more relational analysis as it regards the state as a social relation and not a static entity. This renders the materiality of the state as necessarily contingent (Jessop 1990; 2008), and the distinction between state and society as a necessarily fuzzy one, shifting as it does in different historical-geographical contexts. However, simply dusting off the neo-Marxist theory of the state and applying afresh is not what I seek to do here. Rather, it is important to build upon the understanding of the integral or extended state, or civil society + political society, advanced within neo- 85 Marxist approaches and expand it by incorporating a more open understanding of the way in which hegemonic processes operate within it. My discussion in this chapter then can be regarded as an attempt to describe some of the building blocks of newer approaches to hegemony and political space, situating them in tension with the development of developmental state theory, which, to date, has been historically influenced by developments within state theory and the broader social sciences. One would hope that that the study of development continues to evolve through this interaction, and the discussion of my own approach to developmental state restructuring, hegemony and social space in the Preface and Chapter 1 is an attempt to provide and alternative take on the politics of economic reform. I argued that this can be done by carefully adapting the concept of hegemony to include a much more detailed focus on the way in which multiple power relations intersect and inform the construction of the integral state, particularly through an analysis of how demands emerging from the events of the democratic uprising have been articulated during the decade of liberal-progressive rule. In this way, hegemony must be understood as both a process of coordination between social forces and the articulation of an elaborate set of situated ideas and practices; of various truth procedures, to use Badiou’s terminology, in which the meaning of democratic reform as well as its void spaces (i.e. its inequities, blind spots, and missing supplements) are articulated. This means that the construction of hegemony is not simply a process of manufacturing consent that is also armoured with coercion, but is also bound up with the very ways in which concepts such as the state and the market are understood and embraced by the social forces that develop political and economic reform strategies and attempt to put them into practice. Thus understanding hegemony involves 86 understanding reform processes as deeply embedded in multiple forms of power and differentiation (social struggles in the broad sense). These relations include class relations as emphasized by earlier neo-Marxist theorists, but also other power relations that condition social actors, such as the power relations that condition the unity or disunity of historic blocs, and which often exceed them, such as gender relations and other constellations of power relations. In other words, the extended set of relations between state and civil society, at both their inner reaches and outer fortifications, should be understood conjuncturally, as embedded in multiple relations and social struggles and not statically, emanating from an internal core of the state or society. In this way, the geographically variegated role of different parts of the state, as well as of civil society, within a definite historical conjuncture might be understood.34 This is the task to which I now turn in order to unpack just how relations between state and civil society have informed the transformation of the Korean developmental state and the attempts of reform governments to actualize some of the democratic demands of the long decade. 34 While a weakness of this conjunctural approach might be in the fact that it subordinates any clear functional division of roles carried out by different part of the state to a discussion of strategic relations between social forces, its strength is lies in not positing the state as a synthetic whole, with pre-defined roles but outlining how particular roles influence a trajectory of strategic relations. Questions of the role of the state in this dissertation then, are not primarily oriented towards a synthetic model, or ideal-type formulations. Rather, they are regarded as subordinate to historical conjunctures, so that their variability can be grasped, but not necessarily synthesized. It is the particular rather than the general that I am after. Indeed, much of the work of contemporary state theory has been based around creating a synthetic theory of the state. This is very much a project undertaken by Jessop 2002 -- although he would qualify his project as an investigation into a definite conjuncture, much of his work is still organized around trying to figure out what state functions are compatible with a defined regime of accumulation rather than a strategic analysis, which he has undertaken in his more recent 2008 work. Instead, I believe a more strategic and conjunctural approach is in order. 87 Chapter 3: The Rise of Postdevelopmental Finance It is not correct to regard the state theory and market theory in East Asian development analysis as directly the opposite. Rather, we can say that raising and distributing resources is performed in the interaction between the market and the state. Such interaction varies from the maximal intervention of the state to minimal one, all of which are combined with the market. Maximal intervention of the state and minimal one can be posited as poles in the same continuum, rather than the state and the market. The point is that the state’s intervention in the economy is not seen as contrary to the market, so the question is really whether the state’s intervention is market-friendly or anti-market. For example, the state’s intervention in South Korea was market-friendly: it just aimed to make business and market flourish and develop rapidly, overcoming diverse obstacles to market and business development. Cho Hee Yeon, The Structure of the South Korean Developmental Regime and its Transformation. (1999, 409) [T]he withering of the capacity of the state and the overinvolvement of the state in such matters as the workings of the market… all seem on the surface to diminish the powers of the state; but, in fact, they provide the basic premise on which rests its very necessity. The historical circumstances of this paradox render it impossible for any democratic demands to separate a critique of the state from a critique of the move toward a market society. Wang Hui, China’s New Order (2005, 91-92) [W]e need to replace this framework with a conceptualisation of states and their associated strategic capacities as products of social and political relationships both inside and outside the state. Adopting this view of the state highlights the process of state transformation – as opposed to the enumeration of the features of strong and weak states – as the crucial problem of contemporary political science and political economy. The strong state so beloved of the statists is a chimera that obscures the more important process of state transformation that is taking place under the pressures of global economic and political change. Kaniska Jayasuriya, Beyond Institutional Fetishism (2005, 382). As discussed in Chapter 1, the process of developmental state reform has raised several political dilemmas for democratic reformers during the long decade of economic reform. In particular, while procedural reforms have been enacted and steps toward engagement 88 with North Korea have been made, efforts to institutionalize economic democracy have been very difficult to achieve. This is because many of the features of Korea’s developmental planning that might be used to compliment economic equality have been restructured in favour of a more neoliberal institutional alignment. This is most apparent in the case of developmental finance. While financial policy does not replace the necessity of adequate redistribution measures and a welfare state, it can complement broader efforts at egalitarian reform by directing credit into strategic sectors that provide high paying jobs and employment. As Esping-Anderson (1985) points out, the attempted socialization of capital flow, rather than of capital stock, has been key feature of Scandinavian social democracy (especially in Sweden and Norway). However, the degree to which such socialization can be effective is largely determinate on whether or not it compliments economic growth in a substantive manner; i.e., by generating investment in strategic industries and dampening inequality. However, in the Korean context, it seems that democratic reformers have opted for the restructuring of the state’s strategic discretion over financial resources in a way that has made the situation of labour more precarious and the financial market more hegemonic. In order to better understand this process, and why it came about, it is necessary to first examine how the financial capacity highlighted by theorists of the developmental state has been transformed, as well as some of the political motivations behind this process. This task will require approaching financial restructuring with a perspective sensitive to the interaction between political and civil society, as I have advocated in the previous chapter. The state, civil society, and the market appear as external to one another in much developmental state theory, hazarding the assumption that the state 89 merely calls the shots in industrial development, and thus in financial restructuring. By extension, where state autonomy and societal support for it cannot be perceived, the transformation of state capacity is taken to be a symptom of predation rather than, say, the result of conflictual processes and competing imaginations as to what the contours of state policy should be. For developmental state theorists, the defining feature of the Korean developmental state was its ability to govern the market through strategically channelling financial resources into new industries that could generate foreign exchange and fulfil the government’s industrial policy goals, advancing up the ladder in terms of the creation of jobs and new industries. It is in this region of industrial policy that the restructuring of developmental state capacity has been the most acute. While this process has involved the expansion of market-based forms of governance, particularly in the domestic economy, and has intersected with broader efforts at democratization, it has not simply led to the withering away of the state or to simple predation (even if there are elements of this). Rather, a great deal of state capacity has been involved in this process, and thus financial restructuring should be thought of as a reorientation of state intervention rather than its demise. Yet, few neo-Weberian theorists have taken up the study of neoliberal financial restructuring – mostly because, for them, it is harder to discern the autonomy of the state since democratization and the 1997 crisis. For them, the state is considered something that is most apparent when its interventions seem to rival market logic, so little has been advanced from the neo-Weberian perspective on how to understand the role of the state in the very configuration of market relations.35 Although 35 Institutional economists, on the other hand, have continued to research and study the macroeconomic effects of neoliberal restructuring on the Korean political economy (Shin and Chang, 2003); however, like the neo-Weberians, they tend to treat neoliberalism 90 Peter Evans (1995), in an attempt to maintain the theory of state autonomy as viable research project, speculates that neoliberalism may provide bureaucrats with a cohesive state project, he does not attempt to situate this policy choice within a more dynamic relational field than previous studies of developmental states. Instead, it is based on a theory of a cohesive state ideally immune from such conflict. Thus, it is difficult to tell what role competing claims for democratization have had on economic reform strategy and relations within reform blocs using his theory of embedded autonomy. Therefore, to set the stage for the examination of reform conflicts and the relations within the reform bloc and between it and other social forces, in this chapter I review how the restructuring of developmental finance carried out before and after the 1997 financial crisis has been influenced by the reform bloc. In particular, I examine how the forms of restructuring that have been implemented by reformers have limited the ability of the state to utilize developmental planning in order to fulfil egalitarian reform goals of the democracy movement. This will compliment the more substantive examination of tensions within the reform bloc that I carry out the following chapters. The political debates surrounding the economic reforms mentioned in this chapter are only briefly dealt with here. A deeper analysis of how democratization and the IMF crisis have influenced reform thought is taken up within in the next chapter. Therefore, the purpose of this chapter is to introduce the financial context that informs reform politics. purely on the ideational level – neoliberalism as simply a bad policy choice – without an analysis of its intersection with other social processes (Jayasuriya, 2005). Thus, while the institutional approach is useful for understanding some of the economic effects of neoliberal restructuring, especially for economic growth, it doesn’t reveal much about the social relations that have given rise to the neoliberal transformation of developmental states. 91 While in this chapter I situate the transformation of financial policy within a broader transnational field of both reform-oriented movements and politicians in Korean civil society with distinct ties to the democracy movement, as well as to the private interests of domestic conglomerates and neoclassically-trained bureaucrats within strategic ministries and international organizations, the focus is on mainly on the economic changes brought about by this transformation. This economic transition has involved a great deal of state capacity, it also undermined developmental patterns of financial policy in terms of how the domestic economy has been targeted for economic growth and the development of new product lines. Furthermore, neoliberal responses to economic crisis have led to the socialization of corporate debt, and to the valorization in the domestic economy of financial capital above other forms of capital, and thus very particular forms of uneven development. The result has been an increase in firm profitability, but declining investment and GDP growth, and a marginalization of labour. Unfortunately, since the Korean developmental model demonstrated its strongest capacity vis a vis financial resources, the reconfiguration of financial policy along neoliberal lines limits the ability of reformers to institutionalize social reform and, as I will show in the following chapters, undermined the hegemony of the reform bloc. Finance and the Korean Developmental State In the developmental state formations described by Woo (1991), Amsden (1989), and Wade (1990) among others, capital and credit for industrial development was considered a scarce resource due to underdeveloped financial markets and limited foreign exchange, so the state was seen as playing a significant role in generating foreign exchange and 92 allocating scare credit. This was seen as a role that was common among many late developers in different historical contexts (Gerchenkron, 1962). Likewise, the Korean state was able to channel scarce financial resources to the domestic conglomerates in return for the acceptance of particular performance-based requirements by domestic corporations. This system led to a general system-wide emphasis on export production geared to earning foreign currency credits that could be used to finance new development and to mastering new product lines through reverse engineering and experience in production – “learning by doing” in other words (Amsden 1989). This system worked jointly with government controls over entry and exit that it exercised through licensing regulations. Depending on the context, if a national firm failed to live up to standards set for its performance the government could, in theory, rationalize the corporation’s assets by forcing it to concentrate on specific production requirements or force it to exit the market. The government had less control over international firms or joint ventures. However, in the Korean case these were much more limited than in other countries and thus there was considerable room for picking winners and losers (Jeong, 2004; Woo, 1991; Wade 1990). Nor was state intervention limited to the private sector. During the Yushin period of the ”big push” into heavy industries of the 1970’s, the state kick started capital intensive industries in chemical and steel making; the creation of POSCO, now a major multinational steel producer is just one example (cf. Amsden 1989 291-316). While state intervention was certainly a factor in Korea’s rapid industrialization, this process was certainly more recursive than developmental state theorists let on. Corporate initiatives in new markets complemented and sometimes conflicted with government policy. Furthermore, the supply of foreign aid used to finance early 93 industrialization was largely determined by South Korea’s participation in US foreign policy ventures. If one looks at the automotive industry, for example, one can see how this nexus between state finance and private initiative worked more clearly. When government planning for the auto industry kicked off in the late 1960s and early 1970s, the government made localization a key demand in return for financial support. Hyundai in particular complied the most with government demands while GM-Korea (a joint venture between Shinjin and GM, later to be renamed GM-Daewoo) and Asia motors preferred simply to assemble imported knocked-down kits and sell them on; they did not invest heavily in local product development.36 Since GM-Korea was not a wholly-owned domestic company the government could not force it to restructure. The Asia motor company, however, did not meet its performance requirements, so in 1975 the government stopped its policy loans and forced it to merge with Kia (Jeong 2004). Here controls over entry and exit, in addition to performance based regulation and the supply of long term credit provided the appropriate mix needed to make industrial targets, but they also required the responses of the private sector. The same formula was repeated across the board for strategic industries. In this system the state effectively played the role of majority shareholder in domestic firms by guiding corporate policy toward targets and nurturing it with patient capital. This means that the state-conglomerate nexus constituted a hybrid system of corporate governance. This nexus would later come under criticism as a form of “crony capitalism” during the 1997 crisis (cf. Chang and Shin 2003, 34-82). However, industrial policy advocates argue that this nexus fostered rapid economic growth in manufacturing (cf. 36 GM later disinvested its shares in 1992 but later reacquired GM Daewoo in 2003, cf. Jeong 2004, 96-100. 94 Figure 3.1) and remained less of a moral hazard during the era of effective performance- based controls than in later periods when strict planning guidelines were removed and strict performance criteria became less of a norm in government-business interaction (Chang et al 1998). Source: Bank of Korea Internationally, much of Korea’s external finance in the developmental period was provided through direct foreign government aid as well as lending from international organizations. Access to the US market was a key factor in securing this finance, and, politically, Feffer (2003) and others (Lee Byoung Cheon et al 2006) argue that this access and thus much of the finance necessary for Korea’s rapid development was contingent on Korea’s embrace of anti-communism and its participation in US foreign policy -- particularly its support of and participation in the Vietnam war which provided substantial foreign exchange earnings. Some Korean scholars have argued that this 95 dependency on Cold War ideology had broader economic effects, and encouraged a domestic culture of militarization and gendered citizenship, in which higher paying corporate jobs were generally reserved for men with military experience, and women took up waged work in light manufacturing, agriculture or the non-waged work of social reproduction (Han, 2006; Moon, S., 2005; Moon, K., 1997). Though there were often strict criteria for the allocation of scarce financial resources to build up an export-oriented manufacturing sector that provided jobs and income, it should not be assumed that the model was particularly transparent or that there was not a downside of the constant channeling of foreign exchange and development finance to heavy industry. Government-backed policy loans left Korean firms with a high level of debt to equity and thus also of interest expenses. The promotion of externally focused export industries often had adverse effects on small savers as bank interest rates were low and inflation high. This had the effect of channeling household savings into the underground “curb” market.37 As the state’s commitment to social welfare and income redistribution was relatively low due to the politics of recycling export earnings back into industrial growth and export market expansion, domestic savings were quite high as workers would have to save for their own retirement and future living expenses. In addition, in times of crisis the government liquidated “curb” loans to the chaebol in order to stem off financial crisis. The “August 3rd Decree” of 1972 effectively intervened into the curb market by erasing much of the private debt loaned to large businesses by everyday small savers, thus subsidizing the corporate sector by erasing debts owed to 37 Since bank interest rates were low and inflation high, small savers, such as households, workers and small businesses, invested much of their savings in informal loans. Much of this money was invested in domestic conglomerates in addition to other investments such as real estate and other personal loans. For a discussion see Woo 1993. 96 informal brokers and small savers (Woo 1991, 113-115). In general this speaks to an antinomy between smaller savers and large businesses that was a product of the financial politics of the developmental state. Thus, while developmental policy facilitated high growth rates and the rapid development of heavy industry, developmental state planning has not been as egalitarian as has previously been claimed. Although the World Bank’s (1993) miracle study on the East Asian economy praised what it saw as relatively fair income distribution, a lack of statistics on business owners and murky records on the incomes and economic resources of chaebol families, controlling families of the large domestic conglomerate groups, makes it difficult to fully gauge the level of inequality during the period of developmental policy. While Kim Soon Yang (2008, 79) records a higher gini coefficient (a measure of inequality based on mean household income across all households) in non-agricultural sectors, it is difficult to fully determine the assets held by the wealthier urban families.38 Lee Jeong Woo (2006a), a critic of developmental dictatorship and later an economic advisor to Roh Moo Hyun, argues that unearned incomes, such as land holding and increases in land values, may be a better indicator of socio-economic inequality during the developmental period. Between 1963 and 1979 land value increased by 180 times. Considering the fact that roughly 5% of the population held 65% of registered private land, this points to an enormous disparity in assets if not income (Lee, Jeong Woo, 2006a; cf. Kim, Won Bae, 1999). Furthermore, Jeong Seong Jin finds that even during the peak of developmental planning the share of profits to value-added increased faster than wages, which demonstrates that even under 38 A better indication of income inequality is the decile ratio (see Preface) which can be used to compare the incomes of different deciles of the population. Whereas the gini coefficient is a mean indicator, which can not be as easily disaggregated. 97 the Park Chung Hee regime the “intensification of the exploitation of the South Korean working class was the foundation of rapid economic growth” (Jeong, 2007, 60). The Park Chung Hee regime was also dominated by a regional alliance of politicians from the southeast region, known as the TK group for Taegu City and Kyeongsang Province in the Southeast. Large industrial development projects were mostly concentrated in southeast or the capital region at the expense of historically marginalized areas such as the Cholla provinces in southwest (Park, Bae Gyoon, 2003; Douglass 2006). Oppositional politicians from the southwest were very critical of uneven industrial development and the marginalization of small and mid-sized businesses by large conglomerates in the Southeast. Their formulations, Kim Dae Jung’s “Mass Participatory Economy” being the most prominent, therefore tended to highlight a stronger role for liberalized markets in general and small and mid-sized business in particular. Reformers around Kim Dae Jung thus described the relationship between the “dinosaur like” chaebol and SME’s as an example of the “strong controlling the weak” and “taking the whole economy hostage” (Chung U-C, 1997, 20-22) and sought to restructure the nexus between SMEs, big business and the state.39 Liberalization of Developmental Finance During the 1980s and early 1990s as private flows of finance began to surpass lending by foreign governments and international organizations, it was much harder to keep up the rationale for industrial policy and government control of finance. The Chaebol began to openly contest government coordination of financial resources and advocate for 39 Chung Un Chan himself would later serve as Chairman of the Financial Development Committee at the Ministry of Finance and Economy. 98 liberalization (Kim, E.-M. 1993). Indeed as early as 1980, when the new Chun dictatorship installed a new crop of bureaucrats in the nodal industrial policy bureaucracy (the Economic Planning Board), partial financial liberalization began. This liberalization was domestically focused on the banking system. However, policy loans remained central to the regulation of this sector and bank autonomy was considerably constrained. Nonetheless, this period can be described as a transition toward what Eun Mee Kim (1993, 170-181) has called a ”limited developmental state,” especially because of the strategic change that occurred within the economic bureaucracies. Many of these new bureaucrats, trained in America and fond of monetarism and neoliberal economic policy, would later lead many of the early neoliberal reforms after 1987 (Kim, Y.-T. 1999). The prior generation of bureaucrats and economists were strongly influenced by economists such as John Maynard Keynes and Fredric List and had taken many of their economic planning lessons from the example Japan’s rapid industrialization (Woo, J.-E. 1991, 19- 43). They had emulated Japan’s building up of large domestic conglomerates through strategic financial allocation and nodal industrial planning. On the other hand, the new generation of bureaucrats that were installed by the Chun regime had been influenced by Ludwig Van Mises and Milton Friedman and most were likely to have been educated abroad. One reformer that I spoke to complained that these bureaucrats, installed in the Economic Planning Board, “didn’t understand the banking system, just understood liberalism.”40 40 According to the reformer quoted above, the consequence was that they treated the economy as one would chemistry. Kang Kyong Shik, a former EPB bureaucrat and later vice-president, who was involved in financial restructuring during the 1997 crisis, once declared: “Banking is like chemistry; why can’t it [the financial system] be liquidated”? 99 Responding to rising inflation, political instability, and the breakdown of state power after Park’s assassination in October 1979, as well as mounting opposition from the middle classes over misallocation of infrastructure funds and land speculation (Amsden, 1989; Woo, 1991), Chun began to consolidate power by appointing a number of these foreign trained, neo-liberal economists to prominent positions. With the support of the IMF and World Bank, neo-liberal bureaucrats quickly began making plans to restructure the economy with a new macroeconomic stabilization program limiting money supply, curbing wage increases, concentrating firm’s resources, expanding private ownership of banks and investment firms, while reducing government administrative guidance and credit allocation (Kim Y.-T. 1999). Yet, for much of Chun’s presidency, a productive tension remained between these neo-liberal bureaucrats seeking to dismantle the developmental state apparatus and strong government-business ties that also helped retain features of the developmental state. Attempts to restructure the high debt-equity ratios in the financial system or to promote firm specialization were often in vain, as the government continued to bail out leveraged firms and protect corporate interests from excessive modification. The first nominally civilian regime after the 1987 June Democratic Uprising was the Kim Young Sam regime (1993-1998). The split between the two Kim’s (Kim Young Sam and Kim Dae Jung) had led to the election of general Roh Tae-Woo in 1987. This slowed the rate of reform in the democratization process at the political-institutional level. When Kim Young Sam was elected, he sped up the pace of economic restructuring, though not necessarily political reform, with his “segyehwa” or “internationalization” Interview, pro-industrial policy reformer, Samsung Economic Research Institute, November 2006. 100 reforms when he took office in 1993.41 These reforms were geared toward fulfilling requirements to secure Korea’s entry into the OECD by abolishing many areas of industrial policy. These included many state controls over entry and exit, policy loans, and several restrictions on firms and banks’ foreign borrowing, especially limits on short term borrowing by non bank financial institutions (NBFIs) (cf. Chang et al, 1998). Interest rates were also deregulated, and more managerial autonomy granted for the banks. This included expansion of securities and foreign exchange handling, capital market opening, abolishment of policy loans and expansion of sales of corporate bonds to foreign capital, among other liberalization measures. The segyehwa reforms led to changes that fundamentally altered the Korean political economy starting with an increase in short-term foreign borrowing that was used to facilitate intensified competition between chaebol groups entering similar lines of production. Most notable were Samsung’s decision to enter into the auto industry and Daewoo’s entry into semiconductors, product lines which the other company already had competency in. These quickly became examples of the sort of overinvestment in similar product lines that fuelled overcompetition and risky borrowing that would contribute to the 1997 economic crisis (Jeong, 2004). 41 Kim’s ruling political party was forged through a merger with remnants of the old military regime. 101 Source: Bank of Korea The liberalization of financial resources facilitated a rapid expansion of facility investment as chaebol firms sought to enter into new lines of production and expand existing capacity in order to better compete with rival firms. As a result, domestic facility investment by non-financial firms regained steam from 1993 to 1997 with the figures for 1996 (60 trillion won) nearly double those of 1993 (30 trillion) (Jeong, 2004). With the exception of the oil crisis and political instability around 1980, facility growth since 1972 had increased in mostly steady increments till 1991 (43.3% p.a from 1972-9 and 20.% p.a from 1983-91) when it began to decline because of both increased international competition and the end of policy loans. Liberalization did cause facility investment to jump back briefly to higher ground in 1993 as a result of deregulation of international borrowing, before falling again during the financial crisis (Jeong 2004) and remaining largely haphazard since (see Figure 3.2, note that the large jump back in facility 102 investment in 1999 is largely due to the steep decline the year before and was not indicative of a sustained pattern).42 To finance this growth the chaebol took advantage of loans by non-bank financial institutions that were able to borrow foreign credit indirectly through the commercial banks or through direct borrowing by their overseas branches (Chang et al 1999; Jeong 2004). This borrowing was also motivated by a desire to offset the increase in worker’s compensation following a summer of historic worker agitation and wage gains in 1987. However, without industrial policy to steer investment into new sectors, the increase in investment in similar product lines merely contributed to an already falling rate of profit (cf. Jeong 2007, 63). In 1993, the 30 largest chaebol raised 53% of their borrowed funds from the commercial banks and 46% from Non-Ban Financial Institutions (NBFIs) for a combined total of 30 trillion won. By 1997 they were borrowing nearly 68% of their funds from NBFIs and only 32% from the commercial banks for combined total of 110 trillion won (roughly 110 billion dollars in 2007 dollars). In 1997, of Korea’s 120 billion dollar external debt, 90% was from the private sector (Kim, Y.-T. 1999). This was a starkly different way of financing new investments than had been the case under the system of policy loans, in which the state coordinated new investments and secured the financing directly or through leaning on the commercial banks. Thus, liberalization of financial borrowing created a rush to lend, and total foreign currency borrowing by Korean banks more than doubled between 1992-1997 (Jeong 2004, p 59). 42 After the crisis Korea has witnessed a slower overall growth rate in facility investment than before the crisis (Jung, 2007). 103 Source: Bank of Korea The short surge in investment and sales following the Segyehwa reforms, and ending in the 1997 crisis, was short lived, especially compared to growth during the heyday of developmental planning between 1971-1979. The expansion of exports following the crisis led to a quick post-crisis surge in facility investment but one that declined sharply thereafter. Furthermore, the easing of restrictions on short term borrowing and entry into new product lines were seen by many industrial policy advocates as contributing to the financial crisis. Such investment slowed overall growth as new investments were laid into product lines of other national firms. This increased the costs of competition without sustaining overall growth or facility utilization (cf. Jeong, 2004, 159-169; Chang et al 1999; Jang and Lim, 2006a). Furthermore, short-term foreign liabilities in private firms increased as part of this process. As Figure 3.3 shows, growth rates in exports remained low before the crisis, and GDP only nominally improved during in the short period after 1992; however, since then, when compared to previous periods, GDP growth has continued to decline even as exports have recovered. 104 The Rise of Postdevelopmental Finance The currency panic that ensued after the collapse of the Thai real estate market in 1997 resulted in severe liquidity problems for Korean corporations as investors recalled loans and raised lending rates. Korean firms starved for capital began to collapse. However, this problem was further complicated by the IMF treatment of the crisis at the behest of its foreign lenders. The IMF tended to treat the crisis as endemic to the organization of the South Korean economy and thus demanded its overall restructuring. This was a controversial interpretation, and seemed geared to the interests of foreign investment capital rather than the stability of the Korean economy. Even the non-bank financial institutions that had many of the risky short-term loans in the period of liberalization over the previous decade had maintained a net operating surplus over financial costs until the crisis hit (Dumenil and Levy, 2005). Though in need of better regulation and reform the treatment proposed by the IMF was not to simply reform this sector but to treat the entire Korean economy as if it were suffering from a long-term inflationary crisis rather than a temporary squeeze for credit caused by risky financial liberalization and creditor panic (Park, YC 2006). Interest rates were quickly raised, resulting in the collapse of many Korean corporations and the selling of their assets at fire-sale prices. This also introduced a degree of foreign ownership in the Korean economy that did not previously exist. As restructuring proceeded, the government also began to privatize public assets and sell government shares in Korean corporations. By the end of 2004, foreign investors owned nearly 50% of the shares of Koreas’ largest companies (Hart-Landsberg, 2004; cf. Hart- Landsberg and Burkett, 2000). However, though foreign ownership has increased, the 105 families that run the largest conglomerate groups have still maintained control through circular ownership between affiliate firms and a central holding company (cf. Kim, Jin Bang, 2003; Kim H and Kim W, 2007). Furthermore, the largest of the Korean chaebol groups were also able to benefit from the crisis by buying distressed assets of smaller conglomerate groups. While some observers have described the 1997 financial crisis as merely a case of the looting of the Korean economy by foreign institutions and foreign firms (Chussodovsky, 2003; cf. Lee CG, 2004), in reality the situation was more complex. Support for market reforms come from both political and civil society in South Korea. The incoming president Kim Dae Jung had partially based his campaign on counter balancing the power of the chaebol and, thus, was not completely adverse to the economic reforms recommended by the IMF. Kim Dae Jung had also promoted market restructuring, equitable distribution of income, and the end of government support for the chaebol as part of his (1996) Mass-participatory economy manifesto. The Korean democracy movement and the civil society groups that emerged from it were also very critical of the large domestic conglomerates and pro-growth policies of past governments, which they saw as subordinating concerns about the environment, gender equity, labour rights, and redistribution to industrial development. They had also advocated for greater independence in national economic development (cf. Kim Soohaeng 2007) and to a degree the chaebol had historically been seen as obstructing this goal by propping up the dictatorships. During the mid-1990s civil society groups such as People’s Solidarity for Participatory Democracy (PSPD) and Citizens Committee for Economic Justice (CCEJ) had contested the murky governance structure of the chaebol – citing the lack of chaebol 106 transparency as a source of political and economic corruption. These groups focused on reforming corporate governance through monitoring, policy proposals, and minority shareholder agreements, and won key cases against Samsung Electronics and other chaebol (Kim and Kim, 2001; Cho D-Y, 2006).43 For the most part, Kim’s government and even some of the economic reform NGO’s that supported it were favorable to attempts to reform both capital and product markets in ways that resonated with some IMF reforms. Reformers supported the strengthening of shareholder rights and limiting government lending to the chaebol, even if they did tend to disagree with particular aspects of the response to the crisis such as the changes to labour law and the privatization of state enterprises. The same can be said for many of the economic bureaucrats that negotiated Korea’s crisis restructuring with the IMF. Except for divided opinions over the advantages and disadvantages of a government-owned, centralized asset management company to manage and dispose of non-performing loans (Park YC, 2006), there were few major differences reported in the viewpoints and attitudes among Korean bureaucrats and IMF personnel (Kim and Byeon, 2002).44 While some reform movements supported reforms to corporate finance, other reform intellectuals were more cautious about endorsing the restrictions on lending to the chaebol. Most of the debates here echoed those between developmental state theorists and institutional economists. Industrial policy advocates on the left regarded the ability of the chaebol to allocate resources between member companies to be an effective catching up mechanism that enabled the chaebol to raise patient capital internally, especially under 43 Interviews, minority shareholder activists associated with PSPD, CCEJ and SER, November 2006 and March 2007. 44 Interview, IMF economist, February 2007. 107 conditions of scarcity. Shareholder activists, however, regarded this function as distorting prices and profitability, and a symptom of a larger lack of transparency and accountability on behalf of the chaebol. They also saw implicit state guarantee of chaebol investment through policy loans as a moral hazard as corporate governance structures were opaque and there was no guarantee that financial resources would not be channelled toward unprofitable activities.45 In contrast, shareholder activists argued that the ownership rights of investors should be strengthened in order to ensure firm transparency. Politically, the reform bloc could not decide on a clear strategy for retaining industrial policy and reconfiguring it on a democratic basis. This created tensions between both liberal and leftist reformers within the bloc, as policies were introduced that compromised sustained growth and full employment. Ironically, the restructuring of the Chaebol facilitated greater involvement by the state in regulating the chaebol than had been the case following the segyehwa reform. This involvement, however, lacked many of the strict performance guidelines that were a part of developmental financial planning. Nonetheless, Shin and Chang (2003; cf. Hahm, 2005) point out that it was actually the “Keynesian” recapitalization of the financial sector and rescheduling of short term debt that was essential to the recovery. They argue that the Korean economy did not begin to recover until after the Korean government was able to negotiate the lowering of IMF mandated interest rates and budget cut-backs. The way in which this recapitalization was used, however, was to lessen the debt ratios of the Chaebol, socializing it with government debt. As Figure 3.4 shows, high debt to equity 45 Interviews, PSDP, SER, CCEJ and Taean Yeondae affiliated reform activists, November- March 2006/2007. For some of the debate on the corporate structure of the Chaebol and methods of intra-firm resource allocation or ‘tunneling’ see Shin and Chang (2003) as well as Kim Jinbang (2004) and Baek, Kang and Lee (2006). 108 ratios had been a key feature of Korean firms throughout the developmental period, but this was reversed by the IMF reforms as this debt was socialized. The Kim Dae Jung government also attempted to create a ‘Grand Social Compromise’ between business, labour, and the government to legitimize restructuring. Although the majority of unionists rejected the agreement that was made in tripartite negotiations in early 1998, the government regarded the deal as fait accompli and proceeded with restructuring efforts. This “agreement” gave the state the legitimation it needed to carry out the ‘big deals’ of government-induced business swaps between chaebols that had invested in other firms’ product lines (the swap of Daewoo’s semiconductor business for Samsung’s automotive line being the most prominent). However, as I shall discuss in chapter 5, the layoffs and unemployment initiated by this process led to the labour movement’s quick disillusionment with the Kim Dae Jung administration’s social cooperation agenda (Choi, 2002). This diminished the reform government’s capacity to institute further economic reforms because of the lack of social support for them. As a result of the neoliberal reform during the IMF crisis, state capacity was directed toward accumulating large foreign currency reserves in order to fend off any future runs on its currency as a result of speculative investment or investor panic. In some ways this is lamentable, because the accumulation of currency reserves under a more tightly regulated financial system could have been used to supplement welfare provision, rather than being reserved as a stop-gap measure to prevent financial panic in a liberalized financial system. Under the liberalized system of postdevelopmental finance, foreign capital has been much more characterized by short termism than was the case in the developmental period, during which foreign capital was more explicitly tied to long 109 term projects (cf. Shin and Chang, 2003; Jeong, 2004). In addition, domestic capital has greater freedom to seek new investment and relocate capital abroad. This compromises the state’s structural capacity to guide investment, especially since the government has replaced the socialization of investment flow with the socialization of corporate debt, with little regulation on new investment. Source: Bank of Korea Postdevelopmental Finance as ‘Sovereignty Regime’ While the Korean state has been active in both developmental finance and the restructuring of that model, it would be wrong to regard the ability to finance development in a vacuum. The same point can be made for the ability to restructure a path dependent financial system (i.e. a system of financial flow in which the role of the state and corporate sector have been reinforced each other for so long). Instead, it is important to also situate financial policy within the wider, variegated environment (cf. Peck 2008; Ong 1999) of global policy networks and uneven institutional development 110 which seem to inform, but not necessarily determine, the space available for heterodox financial policy. Without an understanding of the changes that have occurred to international financial policy since the end of the Cold War, it would be difficult to situate the restructuring of the Korean model and many of the forms of financial policy that have been applied in the reform process. While the purpose here is not to give a full genealogy of Cold War and post-Cold War financial policies, it is useful to situate the Korean state’s financial policies within some of the larger changes in international policy. These changes intersect with Korean reform trajectories, since the end of the Cold War. During the Cold War, developmental finance in South Korea was roughly articulated along foreign policy networks aimed towards creating a bulwark against communism in Northeast Asia. The financial policies carried out through these networks generally fell within the framework of embedded liberalism (cf. Ruggie 1982) loosely embraced by the Bretton Woods institutions. This framework allowed the national states considerable room to regulate their domestic economies through Keynesian policies, and in developing countries for more heterodox policies to be experimented with. However, beginning in the 1970s and accelerating under the Washington Consensus, new financial actors and pathways of coordination have replaced developmental circuits of finance. These have included ratings agencies that evaluate firm and sovereign debt and transnational institutions such as the Bank of Internal Settlements (BIS) and IMF which set requirements for liquidity reserves. Under the new transnational norms enforced by these agencies, then, the space available for developmental financial policy of the sort carried out during the Cold War has shrunk. 111 In a sense, the transformations described in the course of this chapter point not simply to changes at the behest of domestic policy makers but as part of a transnational sovereignty regime. John Agnew (2005) has used the term “sovereignty regimes” to describe the “effective sovereignty” of state and non-state actors in the global governance of currency. The term is also applicable to describe the linkages between domestic and transnational actors involved in the restructuring of developmental finance in South Korea. Table 3.1 attempts to schematically conceptualize how some of the changes to South Korean finance I’ve been discussing are integrated into the institutions of the global political economy. This regime of postdevelopmental finance is therefore unevenly articulated, with standards and practices at the global level but increasing variation at the regional and (sub)national levels. This variation in actors involved in configuring financial policy and speaks to the uneven and combined development of capitalism (cf. Harvey, 1982). This development, at the institutional level put constraints on efforts of domestic reformers to create a substantial alternative to the current regime of postdevelopmental finance. 112 Table 3.1: The Restructuring of Korean Finance from a Transnational Perspective Sovereignty Regime: Developmental Finance Postdevelopmental Finance Key Actors Economic Planning Board, Chaebol, US foreign policy networks, Bretton Woods Institutions, Japanese product cycles BIS, IMF, Wall Street (Investment Banks, Hedge Funds, International ratings agencies), Ministry of Finance, domestic reform movement, Chaebol Key Ideologies Anti-Communist developmentalism, “Globalization” (segyehwa), shareholder value, financial liberalization, minimalist welfare Key Practices Cold War participation, Industrial policy, strategic allocation of finance, debt financing Financial liberalization, accumulation of reserves, regional coordination (Changmai Initiative), equity-based investment Characterization of financial flows Patient Capital Short-term credit Effects on domestic conglomerates Low Profitability, High Interest High Growth Investment in export- oriented and family owned conglomerates, coordination of competition through industrial policy Higher profitability, less debt and low interest but slower growth and investment, enduring familial control through ‘tunneling’ and holding company structure in largest Chaebol despite attempts at restructuring. The institutions and actors involved in the sovereignty regime summarized in Table 3.1 shows that the transition towards postdevelopmental finance involves not simply ideas about the handling of economic crisis but also the way in which the elite nexus between the state and of the domestic conglomerates (chaebol) have been targeted for restructuring. Significantly, this nexus has been targeted by both transnational and oppositional forces in South Korea and speaks to the need to contextualize neoliberal reforms within a wide range of actors. However, this wide range of actors should not be 113 taken as a sign that a more progressive restructuring of the Korean model was not possible; rather it should alert the reader to the broader transnational field in which the agency of domestic reformers is located.46 While the Chaebol have advocated greater deregulation of industrial policy and privatization of public resources, shareholder activists with ties to both the Kim Dae Jung and Roh Moo Hyun regimes have argued for the restructuring of the family-run domestic conglomerates whose legacy they see as a corrupting influence. This has completed the efforts of international investors to take over Korean firms through mergers and acquisitions. Thus postdevelopmental finance has emerged not simply with the Washington Consensus that replaced much of the Cold War foreign policy network in which more room was accorded for developmental politics, but is also embedded in processes of democratization undertaken by domestically oriented social forces who, in their own way, were critical of Cold War developmentalism. This simultaneous nature of neoliberalization and democratization have spurred scholars such Gills and Gills (1999) as well as Gray (2008, 6-7) to speak of this process as a “double transition.” In South Korea, the restructuring of developmental finance needs to be 46 While a more detailed examination of the transnational networks in which this agency is embedded is certainly warranted, in chapters that follow I am largely focused on examining the hegemonic processes reformers have attempted to institutionalize an alternative to the developmental state. While much current political (c.f. Keck and Sikkink 1998) and geographical theory (c.f. Yeung 2007) takes transnational networks as a point of departure, there is often a tendency in this research to neglect the influence of larger social processes including the formation of hegemony. The result is that often power relations become considered ontologically situated within the network itself rather than in broader social formations. Although, a focus on networks is not necessarily antithetical to analyses of hegemony, I focus more on the production of hegemony, and my discussion of networks, and especially the nexus between civil society and the state is subordinated to this discussion. In other words, it is hegemonic process, rather than a contained network ontology that I examine here. 114 understood as part of this process, in which social forces operating at a variety of scales have gradually restructured the role of the Korean state in managing financial resources. The Limits of Postdevelopmental Finance As I have discussed above, the forms of state regulation that have been adopted in the restructuring of the financial policies of the developmental state have directed state capacity away from overseeing long-term domestic industrial investment and control over capital flows towards a more haphazard regulation benefiting financial capital over industrial capital, and capital over labour. This trajectory of financial liberalization began under Kim Young Sam, but it was the reaction to the 1997 crisis that cemented it into place, replacing state coordination of investment within industrial firms through a debt- based system with a model in favor of a shareholder-based system of corporate governance. While this transformation has required state outlays of capital and strong austerity to reorient corporate investment, this restructuring has not led to a period of sustained growth or fairer redistribution. At the aggregate level, the overall rates of facility investment and GDP growth have declined. Neoliberalism has led, however, to a slight increase in the profit rate of manufacturing firms and a larger increase for finance since the crisis (Jeong 2007). 115 Source: Bank of Korea As Figure 3.5 shows, the recovery in the ratio of ordinary income (also know as ordinary profit) to sales seems inversely related to reduced interest payments of Korean firms following the socialization of corporate debt. This means that the dramatic, government absorption of firm’s debt pictured in Figure 3.4 above accounts for much of the increase in the share of ordinary income to sales. This change in firm income is harder to detect using Jeong’s (2007) calculations of the profit rate, as these include net interest in their calculation (i.e. profits includes net profits plus net interest; cf. Brenner 2002, 285-288); in other words, they are indicators of surplus rather than income after interest. This makes it difficult to detect the influence that high debt levels had on the firm income rate during the developmental period through Jeong’s calculations (see Figure 3.6 below); though Jeong’s figures do show that the surplus extracted through production was very high. In addition, the low level of financial profit recorded by Jeong (2007) indicates that even though manufacturing firms had a high profit rate, lending to them was not a highly profitable enterprise under developmental finance. 116 Source: based on Jeong (2007, 63). As the supply of policy loans has dried up since the crisis, and caps put on bank lending to the chaebol, the increased profit share of Korean firms has not led to higher levels of industrial investment. Instead, new investment is contingent upon raising funds either internally, through retained earnings or cost cutting, or through shareholders. As Figure 3.7 shows, stockholders’ equity shares of total assets have grown high relative to total borrowing in the years after the crisis, putting more power, theoretically, into the hands of shareholders than the state—bank—chaebol nexus of the developmental period. However, chaebol families continue to control their firms through circular investment and exercise more power as equity holders at present than they did under the developmental regime, where the government acted as a de facto majority shareholder. Furthermore, as firms tend to store more capital to avoid costly takeovers (Kim, Yong-Gi, 2005; Aglietta, 2005) and distribute earned profit in the form of dividends rather than new investment, it is unclear whether or not the shift to equity-based finance as opposed 117 to the system of policy loans and performance-based regulation bodes well for future investment and economic growth. Source: Bank of Korea In terms of investment, while exports have been strong since the crisis, domestic investment in manufacturing has been sluggish. Between 2001 and 2006 only five sectors have had robust expansions of facility investment. Manufacturing was not one of these, with significant growth only in semiconductors and audio-visual equipment, which had the highest annual output growth at 22% with 32.3% in facility investment for manufacturing (Jung 2007). Much new investment has been in risky or speculative investments such as venture capital and mortgage and consumer credit. Financial services has been one of the few growth industries in this period, with facility investment growing at 39.9 % per year (though it only posted an annual output growth of 6.5 per cent, pointing to the speculative nature of much recent financial investment). Facility investment by real estate and business service industries grew to a combined 57.7% annually from 2001 through 2006 (Sohn, 2007); however, this has not increased the 118 overall growth rate of GDP which continues to decline. Furthermore, the development of new real estate bubbles which has paralleled the privatization of the banking system has created structural problems – for instance, bubbles have plagued the financial sector three times (in venture capital, credit card debt and real estate) since the 1997 financial crisis – that the state has difficulty in addressing (see Chapter 4) since it is reticent to use state intervention to control financial flows. Jeong’s (2007) analysis of the profit rate is useful for understanding sources of profitability such as the intensification of labour exploitation and the organic composition of capital. While Jeong’s decompositions only extend up till 2002, he argues that labour exploitation accounts for the rise in manufacturing profit rate after 1997. Further analysis by Guarini (2006, 30) as well as data from the national accounts reveal a widening gap between wages and productivity since 2001 (figure 3.8). This indicates that wage growth continues to grow slower than output within Korean firms.47 This means that increases in the profit rate since 1997 have been based on an intensification of labour exploitation. Jeong argues that this was complimented by the devaluation of capital stock brought about by governments socialization of firm’s debt. This slower wage growth undercuts domestic demand, worsens inequality, and undermines the efforts of the reform bloc to promote social solidarity. 47 While there are different methods of estimating profit rates, Jeong (2007) provides the most thorough decomposition available using Marxist methodology. Finding sufficient data to calculate the profit rate for the Korean economy raises strategic problems, and unfortunately Jeong’s data series only extend up to 2002. Brenner (2002) and Crotty and Lee (2009) use ratios of profits to assets as an alternative method; however, it hard to further decompose these numbers. Thus for the period after 2002 I have used the profit share ratios in Figure 3.5 above and Guarini’s (2006) examination of the wage and productivity gap, plus data from the national accounts to identify potential trajectories in profitability since 2002. 119 Source: Bank of Korea This raises questions to whether or not a new developmental model could perform better than neoliberalism and whether or not some return to developmental policy, though on a democratic basis, might be better for generating jobs and investment. While the cold war frameworks of developmental policy have been reformed, industrial policy advocates have argued that a institutions of social cooperation could be used to create a new framework for industrial policy through creating incentives for research and innovation, and through setting industrial standards for wages and investment. This might help generate investment in more highly value-added industries where patient capital and high debt levels are often necessary, while also satisfying democratic demands. In particular, new forms of planning might be used that can correct for the bias toward heavy industry, as well as the environmental problems, regional bias, and gender and socio-economic inequality associated with the developmental dictatorship. Industrial policy might also be used in a way that compliments the struggles for greater recognition of the inequalities 120 produced by the previous developmental trajectory through greater redistribution. However, this would entail a more heterodox approach to restructuring than has so far been carried out. Certainly, there is room to do this, but it is a question that involves the ability of reform forces to coordinate between labour, the state, and business, as well as the creation of new state institutions that can regulate industrial investment in a more democratic manner than previous developmental and neoliberal policy (see Chapter 4, below, on some of the Korean debates about welfare state development). Conclusions The purpose of this chapter has been to examine how the system of developmental finance has been restructured within an expanded field of interactions between reform movements, economic bureaucrats, business groups and international organizations, with an emphasis on the post-1997 crisis conjuncture. This reform has seen the radical transformation of the forms of financial channeling and long term industrial targeting performed by previous Korean governments. This transformation, however, has not seen a mere withering away of state capacity, but rather its reorientation towards facilitating neoliberal restructuring. In the process I have tried to show how it is possible to discuss state capacity in a relational manner without the assumption that state autonomy is necessary for the state to effectively encourage development or undertake reform. On the contrary, state capacity has been examined here in terms of extended power relations that inform how both developmentalist and neoliberal projects have been formulated. Thus far, the analysis of this conjuncture has remained at a relatively macro-level, showing specifically how developmental finance has been deployed and restructured during the 121 post war period. To a degree, countries such as Japan and Taiwan (also commonly regarded as developmental states, cf. Wade 1990) have experienced similar pressures for reform and my discussion of some of the international as well as internal constraints on developmental policy and sources of neoliberal reform might provide the basis for some interesting comparisions between countries; but such is beyond my purposes here.48 What I would like to do now is narrow the focus to some of the relationships within the liberal- progressive bloc during the long decade in order to show in more detail how the postdevelopmental transition has complicated the reform priorities of the liberal 48 While this chapter has detailed changes to the financial policies and the state/bank/chaebol nexus described by developmental state theorists, the changes I have described also point to broader transformations in patterns of capital accumulation that further research might examine. For instance, regulation theory might add much to the study of the current conjuncture, detailing changes to Korea’s accumulation regime and the various modes of regulation informing it. The rise of postdevelopmental finance described here points to a transition in the way that this regime is regulated, especially the potential of the state to manage high rates of economic growth. The degree to which change in a financial mode of regulation speaks to a transition toward a finance-based accumulation regime, however, is debatable. While financial restructuring has led to speculation in asset markets, more evidence is necessary to demonstrate to what degree financial forms of accumulation have displaced traditional manufacturing. For the moment it seems that an export-oriented accumulation regime continues to dominate the South Korean economy; however, financialization has enabled individual firms (rather than the state) to have greater control over investment decisions, thus expanding the room for speculative activity and export of capital. Examining these changes in light of Jessop and Sum’s (2006) regulationist analysis of exportist regimes, for example, might provide an avenue for further research. When I first began writing this I created two schematic diagrams detailing the circulation of capital under developmental and postdevelopmental periods, and which I filled in anecdotally, to attempt to grasp areas of change and transition. These are attached as Appendixes 2 and 3, and are based on expanding the basic Marxist circulation diagram – M-C-M – in order to show different moments in the circulation of capital described and changes to the regulation of labour discussed in Chapter 5. Future work might try to examine different moments of these circuits and look for interconnections, especially between circulation of capital and changing modes of production. At the moment, however, this dissertation is concerned with the political configuration of economic reform (or, to use regulationist terms, its political mode of regulation, in terms of hegemonic politics), and the role of labour and civil society within this reform, so such a project is beyond its scope. 122 progressive bloc. By focusing on some of these relationships, I hope to not only examine how neoliberalism has intersected with democratization, but also examine particular policy areas where political dilemmas have arisen for reformers attempting to reorient the Korean political economy along a more egalitarian and redistributional path. 123 Chapter 4: The Politics of Participation “The biggest issue is neoliberalism or I call it market fundamentalism. It has a history of about 10 years because the DJ [Kim Dae Jung] government introduced it partly by the pressure of the IMF partly on their own initiative. The DJ government deregulated so many things in the real estate market, which has put a fire on the dormant real estate market for ten years so much that a giant has woken up. So the price rise started from that period not from the Roh government, actually. So people do not know this and acknowledge this [fact], so they all think the blame is on Roh Moo Hyun but it is wrong. That movement [towards liberalization] was initiated by the top economic bureaucrats who came from the Honam government… they are the forerunners of the market fundamentalism movement at the moment.” Interview with former member of Presidential Policy Planning Committee under Roh government (March 2007) The task of framing alternative consensuses cannot be left to political advisory groups or think-tanks for political parties and a few of their political leaders. In order to formulate alternative consensuses in opposition to the hegemonic conservative consensus, it is necessary to have a comprehensive intellectual infrastructure formed over the long-term period, as well as the public sphere for policy discussions where various plans for alternatives can compete with each other. In the current Korean reality, asking a politician or a political party to deliver such a vision would be like looking for fish in a tree. The political elite of the opposition party came of age as politicians under the old regime. When they finally came to power, they became preoccupied with factional competition over patronage and the pursuit of their own career interests. Ultimately, the responsibility to advance alternative theories fell to the grassroots movements and to intellectuals. Choi Jang Jip, Democracy after Democratization (2005, 189) The transition to postdevelopmental finance – the restructuring of the strategic state/bank/chaebol nexus and state control over financial resources outlined in chapter 3 – has transformed the capacity of the South Korean state to generate investment and sustain economic growth in the way it did under the developmental dictatorships of Park Chung Hee, and, to a lesser extent, Chun Doo Hwan. This is because the state-bank-chaebol nexus through which the state channelled finance to industrial firms, in return for the 124 fulfilment of performance-based requirements, has been restructured. In its place is a more equity-based form of investment, and a liberalized, de-leveraged financial system. The South Korean state no longer has the same effective capacity to encourage lending in new industrial sectors as it did during the developmental period. In the previous chapter, I discussed some of the outcomes of this transition, as well as some of the actors involved in it. In this chapter I expand this focus to examine in greater detail how developmental state reform has intersected with the reconfiguration of relations between political and civil society in the long decade. While reformers’ attempts to reorient the Korean political economy have met resistance from established corporate and elite interests, in this chapter I want to focus on the contingent character of the reform bloc, and the influence its construction has on reform strategies; i.e. how the fusion of liberal and progressive elements in to a political bloc has influenced the articulation of alternatives to the developmental state and the coordination of reforms with other actors within state and civil society. The experience of dictatorship led to the political unity of the opposition forces and fused them into a cohesive bloc that has contested both the regionalism and elite power of the old, conservative regime. However, as I discussed in Chapter 1, the economic reform strategies of the reform bloc have raised questions about the politics of democratic equality and of democratic participation in developmental state reform. Because of the broad basis of support for reform governments, and the democratic promises they sought to embody, these questions have been the most acute in the “participatory government” of Roh Moo Hyun and within the “participatory economics” of the Kim Dae Jung. The reason for this is that while the reform bloc has effectively instituted procedural reforms 125 and pursued engagement toward the North, democratic demands for economic justice and economic equality have remained subordinated to neoliberal reform. This is largely a problem of articulation. While on the one hand procedural reform strengthens demands for economic justice by providing a legal space from which unions, social movements, and other reform forces can make demands for greater economic democracy. On the other hand, the inability of the reform governments to institute alternatives to neoliberalism erodes popular support for reform forces and risks the return of conservative hegemony, which can also serve to undermine political liberalization. Thus, the ability of democratic reformers to articulate democratic demands within a logic of equivalence, and to effectively coordinate reform between civil society and the state, is a problem that deserves analysis; if only to understand how tensions within the reform bloc informed the selection of neoliberal policy and contributed to the fragmentation of the liberal and progressive forces. In this chapter I will argue that this problem of articulation arose largely because of two reasons. The first reason involves the transition to democracy, which was based largely on a passive revolution that benefited the established elite by accommodating exiting parliamentary opposition. This transition led to only a narrowly expanded basis of political competition in which egalitarian demands remained subordinated to economic liberalism in the dominant strategies of the oppositional parties, which were led by established political parties based in the Southwest. Instead, progressive forces had to work on strengthening their nexus within this political bloc and within civil society in order to expand their influence. The second reason is that within the progressive factions of the liberal-progressive bloc, national unification as a democratic demand has provided 126 the strongest basis of unity between it and liberal forces, to the detriment of economic justice. Thus, demands for egalitarian reform have failed to be articulated by reform forces within a logic of equivalence to either national reunification or procedural reform. In the absence of substantive economic reform, conservative politics and regionalism have come again to undermine the reform bloc. It has also led to poor coordination between reform forces, as the election of Lee Myung Bak has demonstrated. What follows below is an analysis of the problems of the reform bloc from a perspective of some the tensions that informed reformers during the Roh government, and, to a lesser extent, the Kim government before it. Elected in 2002, the government of Roh Moo Hyun was the first government with a substantive internal constituency from both the grassroots democracy movements of the 1980s. These activists were joined in Roh’s Uri party with longer-serving politicians from Kim Dae Jung’s Millennium Democratic Party (MDP), from which Roh Moo Hyun’s Uri Party emerged. In this way, the Roh regime was a more substantial merger of elements within the liberal-progressive bloc, than previous governments. Furthermore, Roh enjoyed support within a broadly bi- regional voting bloc. As Kim Dae Jung’s successor, Roh enjoyed the support of the Southwest, and, Roh could also generate support from Kyeongsang province in the Southeast, from which he hailed, and which traditionally supported the Grand National Party (GNP). Roh’s government came into office with large mandate for reform and a cadre of younger reform oriented politicians and advisors from a variety of backgrounds who could help reorient the Korean political economy. However, once in power, the progressives in Roh’s “participatory government” suffered defeat in most of their policy proposals and reversed their course on others. While Roh’s campaign stressed social 127 cooperation and slowing the pace of neoliberal economic reform, in practice, his tenure saw an acceleration of neoliberal reform. Roh’s embrace of trade liberalization and labour law reform (cf. Armstrong, 2008) resulted in the breakdown of tripartite mechanisms of social cooperation and led to tension between the state and civil society. This raises the question of how interaction between reformers, bureaucrats and social movements influenced this turn of events. There was broad support for the Roh regime across both region and civil society, so an analysis of how his regime failed to create a broader hegemonic push for substantive democratic reform is important for understanding the larger strategic problems encountered by reform movements. While these problems have been perhaps most visible in the Roh Moo Hyun government, the study of them should not be confined to it. What I shall do in this chapter is to examine how some of the reform problems encountered within the Roh regime can be related back to the way in which political and civil society have been reconfigured within the larger trajectory of democratization, and, in particular, to some of the conflicts and tensions encountered by the liberal-progressive bloc. While reform governments have used the participation of reform forces to legitimize their rule, I argue that they have not utilized this participation in a way that can suggest and implement substantive egalitarian alternatives to the existing power of the domestic conglomerates and state administration. Through an examination of conflicts around key issues of corporate governance and trade liberalization, I show how these reform dilemmas have been influenced by and contributed to the fragmentation of the liberal progressive bloc into competing factions. To do so, I will describe some of the tensions within the reform thought of the 1980s democracy movement and then consider how the reform priorities 128 of this movement have influenced the politics of participation under the reform governments. Reform Thought and the ‘Long Decade’ The transformation of Korean civil society after 1987 is best analysed by tracing some of the background power relations between groups that influenced the transition to free elections in 1987 and the reconfiguration of political space that resulted from these events. While provoked by a democratic uprising, this transition was accommodated by a passive revolution within the relations between the state and the elite. This led to a further fusion of liberal and progressive forces into a cohesive reform bloc; the ideological tensions within this bloc have led to problems of coordination. Prior to the democratic transition, the 1980s movements were composed of a number of disparate groups of workers, students, farmers, feminists, citizens, and liberal-left intellectuals loosely organized into a broad based movement known as the Minjung movement. This movement was in many ways an umbrella movement involving several sites of organization from political opposition parties to church groups, underground networks of blacklisted students-cum-workers, dissident unions, worker’s night schools, and local campaigns for democratic government. Though one can say that this movement included many sites of struggle, these movements operated under a general oppositional framework. They largely articulated their claims within the three principles (Sammin Jooui) of the Minjung movement: anti-imperialist nationalism (Minjok), democracy (Minju), and populism (Minjung) (Hur 2006, 109-115). While there was a regional basis to mainstream opposition politics and an inclination towards market democracy in Kim 129 Dae Jung’s political thought, it was mostly the ideas of two key tendencies within the Minjung movements that animated the more radical grassroots social movements. These were loosely termed NL and PD after the terms National Liberation and People’s Democracy. They constituted two radical poles of the progressive movement, although between them there were many variations of these perspectives. In general, however, the development of both trajectories of radical thought came out of the debates in the early 1980s about the nature of Korean capitalism. One sect (NL) believed that the division of the peninsula by foreign powers was the main issue thwarting democratic development on the peninsula and thus pursued unification as its primary political goal, while the other (PD) put the emphasis on the domestic configuration of capitalism and the establishment of a egalitarian peoples’ democracy as the priority to be addressed first, before considering re-unification. The NL line tended to look more in favour of the regime to the North, while PD remained generally much more agnostic (Park Mi, 2005). Thus, one can see here two competing solutions to problems of Korean political economy, one that put the emphasis on the territorial interests of states and of imperialism, and another that highlighted the capitalist dynamics of state power.49 Many of the young student and labour activists whose protests culminated in the transition to electoral rule in June 1987 (many of whom also participated in the ‘Great Worker Struggle’ in the subsequent months – Korea’s own ‘Hot Autumn,’ if you will) 49As Gi-Wook Shin (2002) has noted, these ideologies emerged out of and alongside the more populist Minjung movement and had inflections of ethnic nationalism in the way in which the Korean people were conceptualized. However, I would argue that the concept of the Minjung put emphasis primarily on the subaltern sufferings of popular classes and thus has a looser connotation of ‘oppressed masses’ than a particularly nationalist limitation. However nationalist articulations of Minjung subjectively are quite prevalent. See also Wells (1995) and Koo (2001). I make the argument in Chapter 6 that perhaps Minjung terminology may be more open than it seems (see also Doucette 2005). 130 were influenced in part by strains of the NL and PD. They embraced goals such as the end of the division system and the expansion of socialist democracy on the peninsula. However, the actual transfer of power brought about by the June Democratic Uprising of 1987 was mediated by constitutional amendments and the organization of free elections by the members of the established regime and the oppositional political parties; thus, a different politics from that of the radical social movements came to animate the immediate transition. Choi (2005) described the transition as a passive revolution in that the transition was managed by the elite through accommodating, partially, some of the demands of the democracy movement. The immediate result of the transition was that the link between the political elite and the state administration was opened to political competition. However, with the election of Roh Tae Woo, the economic and political elite of the old regime, as well as the existing state administration, retained power. As Armstrong (2008) notes, the central instruments of the repressive dictatorships were retained including the National Security Law and the key agency for its enforcement, the Korean Central Intelligence Agency. For the first two regimes after 1987 (Roh Tae Woo and Kim Young Sam), economic decision making remained largely in the hands of the economic elite and state administration. As described in chapter 3, many of newer economic bureaucrats had been in favour of a transition to market democracy since at least the early 1980s and many continued to hold their posts in the state administration (Kim, Y-T 1999). The political elite remained largely in power as well, with only a slight vacillation under the government of Kim Young Sam, whose political party was formed by a compromise between former oppositional party members and members of the old regimes. 131 Nonetheless, even if the transition to free elections was the result of a passive revolution in response to a democratic uprising from below, the old regime could not fully recuperate itself. This expanded the political space for civil society, even if it was not able to strongly affect the field of official decision making in the immediate aftermath of the 1987 protests. From Civil to Political Society After nearly thirty years of military rule, however, civil society groups were poorly developed at the institutional level and unable to advocate a strong alternative to the mandates of the dominant political parties. As Kim Ho-Gi (2005) points out, the transition to free elections and the collapse of the Soviet Union left progressive forces in disarray. Particularly, because many left wing forces had advocated revolutionary transformation of Korean society and the development of some variant of socialist economy, it was difficult for them reconfigure their demands in light of the changed conjuncture. Nonetheless, they soon reformulated their strategies within the political space afforded by democratization and activists began to work through several fronts at once: the labour movement, the political parties, and civic organizations. This created a split within the old Minjung organization between popular movements, such as the labour movement, and civil society organizations. As Seong Woo Hur (2006) remarks, The former maintained its belief in the urgent political need to struggle against capital globalization, a highly developed form of imperialism, and the neo-liberal democratic state that delivered the full impact of globalization. The civil movement’s priority was continued participation in the democratic state. For example, organizations such as Citizens’ Coalition for Economic Justice (CCEJ) and the People’s Solidarity for Participatory Democracy (PSPD) criticised the weakness and limitations of the Minjung movement, accusing it of radical politics and strategic rigidity, and claimed that focusing on class issues would not solve 132 the various social problems facing the post-modern Korean society (Hur 2006, 115). Soon after the 1987 transition, activists from the democracy movement began to create and expand civil society organizations. Organized together in the Korean Council of Citizen’s Movements (KCCM), groups such as the Citizen’s Coalition for Economic Justice (CCEJ), Korean Federation for Environmental Movement (KFEM), Lawyers for a Democratic Society (Min-byun) and the Korean Women’s Associations United (KWAU) set their sites on reforming Korean political economy and the many social, political, environmental, regional, and gendered biases of the developmental period. Progressive lawyers worked on creating a independent prosecution and judiciary, and promoting legal monitoring of human rights. Feminist groups advocated for greater gender equality under the law. Meanwhile, among economic reforms, some of these groups promoted shareholder activism and corporate governance reform to improve the transparency and accountability of Korean business. Others, including People’s Solidarity for Participatory Democracy (PSPD), which was founded in 1994 to bridge the gap between NGOs and the mass movements, worked on eliminating political corruption by monitoring electoral politics. They also promoted better state regulation of industry as well as strategic investments in social welfare, arts and culture, along with reform of the education system to address past inequalities. Meanwhile, other groups advocated and pursued projects for peaceful engagement and reunification with North Korea. In this they were joined by an expansion of unification activism within the student movement.50 50 While my discussion of the civil society movement here is more concerned with economic reform it should be mentioned that in the different reforms undertaken by the wide variety of civic movement groups, in their own ways, compliment each other and 133 As Kim Dong Choon (2006) has pointed out, the citizen’s movement (simin undong), in contrast to the Minjung movements (Minjung undong) of the 1980s, entailed an implicit compromise over the limits of political participation. The efforts of civil society were concerned with changing and acting within the existing field of the law. By contrast, the 1980s movements were aligned in overcoming the existing state of dictatorship through mass mobilization and collective politics rather than being explicitly concerned with the construction of new legal frameworks or advocacy networks. It would be wrong, however, to conclude that civil society organizations were not concerned with comprehensive societal transformation even if their forms of mobilization had been transformed. Even though they had switched from revolutionary action to the development of civil society, political parties and post-Marxism (c.f. Jung, Y-T 2000; Yi, 2006;Yi and Ko 2006), the priorities of the 1980s movements continued to inform progressive political practice even if their strategies and tactics have been transformed from one of broad-based mobilization to the creation of strategic advocacy groups and NGOs. One consequence of this, however, is, as Kim Dong Choon (2006) argues, that the civic movement has suffered from a tendency of students and intellectuals from the influence economic reform by introducing new procedures, interest groups, and state institutions into the mix. For example, under Park Chung Hee and Chun Doo Hwan, the prosecution and judiciary remained largely subordinated to presidential imperatives and degrees. Thus, changes to the legal system that introduce a greater degree of independence for lawyers and judges have a recursive effect on economic policy, mediating the politics of development by presidential degree and introducing an additional forum for oppositional forces to press for change. Though a further analysis of the role of the courts in late development and the current conjuncture is beyond the purview of this dissertation, as I am more concerned with how relations within the reform bloc have influenced the politics of economic reform, future analysis of how progressives have utilized the courts as well as an analysis of how the courts themselves provide a potential or problematic venue for egalitarian politics in (post)developmental states would be worthwhile. 134 democracy movement to become professionalized and centered around advocacy work instead of mass mobilization. Thus the constituency of the new civil society movements has become smaller and is less likely to adopt mass mobilization as a political tactic. Though certainly there are a number of NGOs that participate in wider social movements, civil society groups also have limited resources and receive little funding, which limits their ability to mobilize.51 Thus the more limited focus on monitoring and policy advocacy speaks to the constraints of the democratic transition, and the strategic problem if raises for civil society as the mass movements of the 1980s were demobilized. To expand their influence, progressive civil society organizations became more active in attempting to reform political society not only on the outside, through election monitoring and the creation of voter lists (Kim, SH, 2003), but also by supplying reform- oriented governments with policy advisors. Importantly, both the Kim Dae Jung and the Roh Moo Hyun governments facilitated the move of progressives from civil society to political society by promoting reformers to key advisory positions. The government of Roh Moo Hyun, in particular, was staffed with a significantly higher number of former democracy and labour activists as advisors and ministers than previous governments. It also cultivated a closer working relation with economic reform NGOs and the shareholders rights movement (Lee, Yeonho, 2005, 296; Cho DY, 2006, 75; Jang and Lim, 2006b). The positions that reformers have taken up have often been as presidential advisors, policy planners, and heads of presidential commissions. Other positions have 51 In recent years philanthropic institutions such as the Beautiful Foundation and the Hope Institute have been established to fund diverse initiatives by grassroots groups, and unions have also funded grassroots NGOs connected to the labour movement. However, these institutions still do not have the amounts of grants and state funding available to similar organizations in richer countries. 135 also been ministry posts, positions within government sponsored research institutes, and even the post of prime minister, as seen in the case of veteran feminist and democracy movement activist Han Myoung Sook. Fewer reformers, however, have been located in the career administration posts. Thus a key tension exists between politically appointed reform positions within the state and career public officials. This has posed certain problems in getting progressive policy enacted, especially in areas concerning distribution of the wealth and transparency in the corporate sector. Thus, while progressive reformers in the Kim and Roh regimes have made progress on engagement with the North,52 they found their ability to increase social welfare muted by disagreement over how exactly to continue to restructure the Korean political economy. Dilemmas of Economic Reform The problems of economic reform under the liberal-progressive governments of Kim Dae Jung and Roh Moo Hyun needs to be analyzed in terms of the opportunity provided by the 1997 financial crisis and the legitimacy it granted to progressive forces. As Choi Jang Jip explains, The very establishment of the Kim Dae-jung government meant that people supported those who struggled the most fiercely against the military authoritarian regimes. It meant that the government had the mandate to carry out a full-scale democratic reform. In particular, because of the financial crisis that resulted in an IMF bailout loan, the Kim Dae-Jung administration was given an absolute mandate to carry out reform. Concurrently, the status of the all-powerful chaebol reached an all-time low. Under the circumstances the support for the new government, and accordingly the power entrusted to the state, was enormous (Choi, 2005, 183-4). 52 The design of pro-engagement economic policy in terms of projects like the joint Kaesong Industrial Complex, a labour-intensive export-oriented manufacturing zone, spoke to the greater ease with which engagement projects have been organized, as I will discuss in Chapter 7. 136 However, while it appeared that the Kim Dae Jung, and later the Roh Moo Hyun governments had a hegemonic mandate for reform, the economic reforms that they pursued, as discussed in chapter 3, remained subordinated to financial and corporate governance projects, such as shareholder value, that fit nicely into a neoliberal framework. Why then, if there was a mandate for broader reform, were reformers not able to shift the trajectory away from broad neoliberal transformations towards a trajectory with greater emphasis on redistribution and social welfare? The answer to this problem, I would argue, involves not simply the limiting frameworks implemented by the IMF reforms but, in particular, the way in which the politics of participation has been organized under both the Kim Dae Jung and Roh Moo Hyun governments. While this problem involves the path dependent power of elite groups within the state administration and political society, it should not be reduced to them, and must be situated in relation to some of the key tensions in the reform bloc. As discussed in Chapter 3, the Kim Dae Jung government implemented strict restrictions on the domestic chaebol after the 1997 crisis. However, by 2004, the decline in investment by the domestic chaebol, coupled with the expansion of irregular work (cf. Figures 6.1, 6.2) facilitated by post-crisis reforms, led to a growing discontent with the government’s economic policies. This discontent has led to disagreements among economic reformers as to what the role of the domestic chaebol should be in the domestic economy. There was sustained debate over whether or not some form of compromise with the chaebol in return for an increase in investment might be beneficial. Thus, within the extended liberal-progressive bloc and its nexus with civil society, a line of conflict emerged between reformers who preferred to adopt a more pro-chaebol industrial policy 137 and those that promoted shareholder restructuring. In many ways, this lack of a solid alternative framework can be related back to the contingency of the democratic transition: the transition to a more radical democracy had been thwarted by passive revolution, and thus economic reform strategies had to accommodate themselves to an unanticipated conjuncture in which a clear consensus on what to do with the domestic conglomerates, and how to combine this reform with other democratic demands, was lacking. Ironically, both attitudes towards corporate governance restructuring had emerged from economic justice NGOs such as the Citizen’s Committee for Economic Justice and People’s Solidarity for Participatory Democracy. Shareholder activists from these groups have gone on to occupy positions in the government and in other groups such as Solidarity for Economic Reform, the Center for Good Corporate Governance and the Korea Corporate Governance Fund (a fund that invests in firms with transparent corporate governance criteria). Meanwhile, many left-liberal pro-industrial policy advocates have been involved in the creation of a loose network of economists and reformers known as the Alternative Policy Forum (Tae-an Yeondae) which is generally oriented towards promoting debate on social democracy and the development of a welfare state. Reformers loosely affiliated with this network were positioned within both state and privately funded research institutes and some had the ear of important political leaders within Roh’s Uri party.53 Though these reformers all share a similar trajectory through civil society, they have different analyses of the chaebol and different priorities for economic reform. Those in favor of restructuring of the chaebol along the lines of shareholder value complain that the domestic chaebol became bloated during the 53 Interview, Tae-an Yeondae members, November, December, 2006; February, 2007. 138 developmental dictatorship at the expense of small and mid-sized businesses. They also argue that the opaque corporate governance structures of the chaebol are market distorting, and acted as a strong contributing factor in the 1997 crisis as the domestic sector was not sufficiently regulated before it was opened to international investment (Chang U.-C. 1997; Kim, J.-B., 2003). As a consequence, shareholder activists argue that “in order to prepare for external liberalization, we have to prepare the internal environment.”54 On the other hand, industrial policy advocates have argued that the existence of large family run conglomerates can be considered as a response to the challenges of late-industrialization and the scarcity of financial and economic resources available for development. Thus, they argue, issues such as financial tunnelling and the high levels of diversification in the chaebol have to be treated, in context, as a path dependent feature of late-development (Shin and Chang, 2003) and not simply a feature that can be easily done away with. Industrial policy advocates point out that the 1997 crisis was not simply one of corporate governance but also of the liberalization of short term finance and the retreat of the state from its role as a stakeholder in industrial development. While there are certainly reformers who mediate between these positions, the differences between them should not be underestimated and are often acrimonious. Shareholder rights advocates have criticized industrial policy advocates for aiding the chaebol’s hold over the economy and its capital strike against the Roh government.55 54 Interview, shareholder rights activist, Solidarity for Economic Reform, PSPD member, Center for Good Corporate Governance member, November 2006. 55 One reformer I talked to regarded the current situation as a capital strike by the chaebol, but, empirically this is difficult to document. The debate between industrial policy advocates has also led to lawsuits between the different camps and the establishment of rival corporate governance watchdogs, one with an emphasis on foreign 139 They also argued that pro-industrial policy advocates are in thrall to a mythology of national champions similar to the popular conservative discourse of joining the advanced countries (sonjinhwa). Meanwhile, industrial policy advocates have accused the shareholder movement of aiding the takeover of Korean corporations by speculative capital funds (Jang 2005), which they argue has led to firms retaining earnings to stave off hostile takeovers (Kim, Young Ki 2005). One reformer on the pro-industrial policy side told me that if he had to choose between Park Chung Hee dictatorship or a neoliberal state, he would choose Park Chung Hee. “I’m not a nationalist but some kinds of nationalism are good.” Ironically, this was from a reformer who participated in the democracy movement.56 Many of the reformers I talked to who discussed these debates complained that they became too polarized and emotional, situated as they are among the factional tensions and competing democratic demands – especially between nationalism and economic justice – embraced by members of the former democracy movements. There seemed to be a tendency among these former democracy activists to think in terms of static models, to pose questions about economic reform as simple either/or questions. For instance, another reformer argued that there are only “two models” to choose from: the Anglo-American and European social corporatism: “if you remove these two models you don’t have a model.”57 One of Roh’s progressive advisors on economic affairs I funds seeking to buy Korean firms, the other on domestic corporations with murky balance sheets. 56 He also argued that in the restructuring of the Japanese model the state continued to use its control over licensing as well as bank resources (while in Korea, banks have been privatized, and sold to foreign capital) to encourage domestic growth. For him this was evidence of a stronger “national feeling.” In contrast, Korea had instituted caps on domestic ownership and removed licensing barriers to entry into different product lines. Interview, Researcher, Science and Technology Policy Institute, November 2006. 57 Interview, Samsung Economic Research Institute, December 2006. 140 interviewed complained that activists-cum-reformers associated with the Uri had “stubborn logic,” while a shareholder activist complained that they “argued too highly.” This binary logic limited their ability to utilize elements of developmental planning in a more pragmatic fashion.58 The differences between these camps have been most apparent in terms of the creation of incentives for investment; however, both realized that economic growth has lagged and needs to be addressed by reform forces. “As of 2002, we recognized that this kind of system can’t continue strong growth; even the neoliberals feel that some other form may be necessary, that the anglo-american model may not fit.”59 The policies both camps proposed, however, remained different. Pro-industrial policy advocates advised Uri members to scrap Fair Trade Commission regulations limiting cross-investment and bank lending to the chaebol in order to promote domestic investment, while those on the shareholder side have supported strict curbs on bank lending to the chaebol and an increase of taxes on profits and income.60 Partially because of these tensions, the Roh 58 Interviews, Former Advisor on Economic Affairs, December 2006, Shareholder Rights Activist, November 2006. 59 Interview, pro-industrial policy reformer, Samsung Economic Research Institute (SERI), December 2006. 60 While both the Kim and Roh government have taken steps to strengthen the rights of institutional and individual investors through adopting international standards, they have not had a consistent strategy on the how best to manage the chaebol. Meanwhile, the chaebol have been able to evade shareholder power and lending restrictions through elaborate cross-holding and murky governance structures, as depicted in Figure 4.1. In both reform governments much of the debate on the chaebol revolved around equity investment ceilings that ban subsidiaries of South Korean chaebol from making equity investments in sister or non-affiliated companies in excess of 25 per cent of their net assets. These bans were introduced by the Fair Trade Commission in the late 1980s, removed in 1998 and instituted again 2000, as were regulations aimed to prevent cross- debt guarantees within the chaebol. The Roh government also flirted with removing them once again. As Hwa (2003, 90) argues, the constant erection and dismantling of various regulations only adds to the public’s disillusion with government policies. 141 regime has vacillated in its policies toward the chaebol. During the late days of the participatory government, attempts were made to encourage the chaebol to invest more in the domestic economy in return for deregulation. However, there remains little incentive for the chaebol to do this, at least in response to the government’s offers, as they have been successfully able to navigate or water down caps on investment and shareholding through elaborate intra-group shareholding and circular investment through which the controlling family can control the whole conglomerate via a central holding company. They can do this without necessarily needing to directly own the majority of stock in their affiliate firms, and in some cases the main holding company might only own 4 percent of the stock of an affiliate it controls but can nevertheless control its decisions through its control over the entire group. Figure 4.1 diagrams this holding structuring in the case of the Samsung, of which Samsung Everland is the informal holding company. Of course, to keep control within the family, shares do need to be passed on to other family members, and there have been high profile cases of illegal share issuances and evasions of inheritance tax. In general, however, the chaebol have largely been able to avoid strict penalties for this as the government has lacked a clear strategy toward tackling the power chaebol (cf. Kim, Jin Bang, 2006). 142 Figure 4.1: Intra-group Shareholding in the Samsung Group. Source: Based on Kim, Jinbang (2004) The Politics of Participation The lack of a comprehensive framework for chaebol reform is only one of the constitutive tensions of the reform bloc. However, it severely affected the ability of the Roh government to create a unified reform strategy against the economic elite. This confusion undermined the ability of the reform government to coordinate between other social actors in order to enhance the state’s capacity to carry out social democratic reform. In this context, the relative inertia in pursuing a more progressive restructuring of the developmental regime enhanced the power of the old elite and conservative factions within the state administration. A key problem voiced by the loose set of Roh government reformers was that in the absence of clear policy mandate, economic bureaucracies tended to modify policy or call their own shots when it came to Samsung SDI Samsung E-Mech Samsung Life Samsung G. Chem Samsung Eng. Samsung P. Chem Cheil Commun.. Samsung Everland Samsung Elect. Samsung Corp Samsung Techwin Cheil Ind. Samsung F. Chem 143 administrative decisions affecting the chaebol. As one reformer put it, “Unless you have a very clear vision it is easy to get shaken.” “Progressives loose their voice in the ministries… the [ministries] say they accept a new policy then try to implement a different policy.”61 If the ruling party and NGOs could not maintain firm pressure on the state administration, the finance and budget ministries would exercise an informal veto over particular progressive policies, submitting their own policies or revising government directives in such areas as corporate governance reform. Even during the regime of Roh Moo Hyun, these ministries advanced policy explicitly in the interest of domestic conglomerates. In the words of the frustrated policy advisor quoted above: “MOFE [Ministry of Finance and the Economy] governs MOFE.”62 Choi Jang Jip has argued informal elite networks still inform state policy at high levels and continued to be a problem under the Kim Young Sam and Kim Dae Jung administration. This problem has carried on into the Roh Moo Hyun administration.63 These informal networks (piseon) among the elite and the administration “represent the rule of private power within a giant public organization, and at the highest level of the highly centralized state power structure.” Many of these elite networks are formed on a regional and educational basis (see Table 4.1). For example, the Korea University Alumni Association is a key source of affiliation for both conservative politicians and elite business people, second only to credentials from Seoul National University. These 61 Interview, former advisor on economic affairs, January, 2007. 62Interview, former advisor on economic affairs, January, 2007. 63 Roh’s suicide in May 2009 during an ongoing corruption probe has shocked the Korean liberal-progressive bloc and raised introspective questions about corruption in Korean politics. Even though Roh’s administration was perhaps the most transparent to date, it seems that these informal networks have still played a part in corruption within the state administration, and, perhaps, it seems, within the ruling party itself. 144 elite networks extend down even to the high school level, especially in the case of the Kyunggi high school which has produced elites on all sides of the political spectrum. Choi cautions, however, against reading the problems of reformers as simply determined by the power of the elite. Rather, he argues, that the endurance of informal networks are a symptom of the lack of “procedural universality and openness” (Choi, 2005, 184-185). Table 4.1: South Korean Elite: Educational Backgrounds Position Seoul National University Korea University Yonsei University Military Academy Other Total Executive 37.2 8.9 10.9 1.4 55.7 100 Minister 52.5 7.3 n/a 10.1 30.1 100 Senior Official 53.8 13.4 6.7 n/a 26.1 100 National Assembly Member 32.1 10.3 3 3.6 51 100 Source: Kim Yun Tae (2007); based on 1991/1995/1996 statistics Choi argues against fetishizing elite power. Rather, he argues, the strength of informal networks should be seen as a problem that has been influenced by the lack of a clear strategy on behalf of democratic reformers for creating a democratic state administration.64 Choi himself served as Chairman of the Presidential Commission on Policy Planning from April 1998 to April 1999 and could witness this problem first hand. As Choi discusses, the 1997 crisis provided the liberal progressive bloc with a moment of legitimacy and opportunity to reform the state administration, but while Kim Dae Jung 64 The same might be said for the role of the conservative media. While many progressive reformers have blamed the problems of reform governments partially on the conservative media, it seems that the media’s power is enabled by the lack of a coherent strategy to provide alternative forums of debate on social issues. While Roh attempted to reform the media, his party was unable, or rather unwilling, to use their majority to push through reform bills in December 2004. 145 announced a plan for “parallel development of democracy and market economy,” this plan was “avowed but not concretized as a general path for reform policy.” Thus, everything became ambiguous. The scope and principle of a democratic government’s intervention in the market was not defined. Thus, the only way to overcome the IMF crisis was to passively implement the reform package outlined by the International Monetary Fund. In regard to the question of how the market must be organized in a new environment called globalization, a model was not provided where the issues of chaebol restructuring, privatization, labor, employment, social welfare, etc. could be discussed within a single comprehensive framework. In the meantime, following the authoritarian development ideology, market efficiency and market fundamentalism began to gain power as a new hegemony. Through a new dogma, a vulgar theory of the dichotomy between the state and market became dominant; the new dogma argued for the maximum reduction of the state role and the expansion of the market (Choi 2005, 190-191, emphasis added). The failure to create a “single comprehensive framework” for state reform diminished state capacity to pursue to democratic reform by putting limits on how far the reform government of Kim Dae Jung was willing to endorse social cooperation between the state, labour, business, and social movements as a mechanism for state restructuring. Instead of an alternative framework for development, the result was the promotion of a minimalist market order (ironically termed ‘participatory economics,’ c.f., Kim D.-J. 1996) in which the state administration and piseon networks continued to hold considerable power. The opportunity to create new frameworks to restructure the state administration and the market through using excluded groups such as labour and other social movements as a countervailing power was resisted, or fumbled. Thus, the problems of elite power and lack of an effective forum for reorienting the state administration continued on into the Roh regime, but there too, the “participatory government” lacked any solid strategy for participation. In the absence of a clear strategy to deal with vested interests in the 146 bureaucracies, reformers under both the Roh and Kim administration began to seek harmonious relationships with powerful ministries, such as the Ministry of Finance. As a consequence, elite interests in the ministry and the corporate sector had the ability to marginalize progressive reformers when policy disputes erupted, such as disputes between the separation of finance and industry and the structure of domestic conglomerates discussed above. One former presidential advisor argued that the former chairman of the Financial Supervisory Committee, Lee Dong Gyol, and the former Chairman of the Presidential Planning Commission, Lee Chong Woo, had been forced out of the administration by elite interests because they had fought for the separation of financial and industrial capital.65 As I shall discuss in greater depth in the next chapter, under both the Roh and Kim administration, formal institutions of social cooperation became forums in which the government attempted to use the participation of labour and civil society groups to legitimize a neoliberal policy trajectory (cf. Table 5.1). Part of the problem here was that reformers had focused on market reform in the hopes that economic liberalization would complement political democratization. Without a forum to suggest social democratic 65 Sources that I interviewed that were close to these advisors argue that the more conservative presidential advisors had played a large role in these purges, as had Samsung and the economic ministries. Interview, former presidential advisor on economic affairs, January 2007. A number of key economic reformers were forced out of the Roh administration in this way and such purges were not limited to economic policymakers or intra-party factions. A member of a culture sector NGO argued that the conservative press was able to marginalize the progressive culture minister, Lee Chang Dong, who opposed the government’s plans to remove protections on the domestic film industry by manufacturing a false scandal. Interview, fall 2006, member of the Alliance to Preserve the Screen Quota. In general, these sorts of purges began after the more progressive leaders of the Uri Party were marginalized following the failure to pass several reform bills in December 2004. After that, a more moderate faction assumed party leadership, many of whom hold key positions within the current Democratic Party. 147 alternatives to market-oriented policies (for example, some form of co-determination system with greater participation by labour, or a wage earner’s fund that could direct industrial investment),66 democratic participation remained subordinated to neoliberal policy. This led to the limiting, crippling, and eventual collapse of social cooperation mechanisms and discord between labour and both the Roh and Kim governments. Meanwhile, state capacity over capital flow and industrial policy, became further restructured, creating problems for the state to maintain high employment and economic growth. Without some form of grand social compromise, progressive reformers found that it was very hard to push comprehensive economic reform in other areas, particularly income redistribution. After union wage gains following the great workers struggle in 1987, income inequality has been increasing since 1992, moving from a GINI coefficient in the 0.285 range in 1992 to the .33 range in 2005 (IMF, 2006, 71).67 Much of this is linked to the decline in regular employment following the 1997 crisis. The government has not been able to meliorate the increase in inequality and irregular employment with significant increases in taxation or social expenditure. As Figure 4.2 points out, social expenditure remains far below OECD average. Some presidential advisors argued that the “social tripartite structure can be a ‘win win’ game” if used to solve “problems regarding social welfare and taxation.”68 However, without a central forum for dealing with these 66 When proposals such as these were made, such as when unionists proposed buying out GM Daewoo with a mixture of government and pension funds, there were quickly dismissed. Interview, KCTU activist, June 2006. 67 As discussed in Chapter 3, it is hard to precisely fully measure inequality in wealth due to lack of statistics on the total net worth of chaebol families. 68 Interview with former member of Presidential policy planning committee, March 2007. 148 issues in the form of a grand social compromise, a dilemma was created in terms of what forms of redistribution could be pursued. Source: OECD Country stats. The lack of effective political coalition between labour and the Roh government led to a lack of political will in creating redistributional policy. Thus, progressive policy makers attempted to work around this constraint and pursue other forms of redistribution. As one key policy planner described, Income redistribution is very hard to push in Korea because of the wide resistance from conservative forces and because of people’s sentiment. So I tried this through asset redistribution rather than income redistribution; by addressing [inequalities in] education and real estate…69 As progressive policy makers close to the president chose to attempt to redistribute what assets they could through housing and education policies, the government then became involved in the re-developing existing apartments to increase the supply of low-income housing and attempted to reform the education system. They did this by modifying the admissions system for post-secondary education in order to benefit students from poorer 69 Interview with former member of Presidential policy planning committee, March 2007. 149 socio-economic backgrounds who cannot afford the many cram schools and private institutes that most Korean students go to in order to get into a good university. However, these policies have been at best stop-gap measures. Furthermore, the government’s real estate policy was contradicted by the restructuring of the financial system which had led to speculation in real estate through poorly regulated promotion of mortgage and consumer credit (Crotty and Lee, 2005). By the fall of 2006 the failure to halt real estate bubble was acknowledged, at least confidentially, by Roh’s policy advisors on real estate policy.70 Exodus, voice, and rupture Frustrated by the limited politics of participation, a number of progressive policy makers began to publicly criticize neoliberal interests within the ruling party. After Roh himself announced the start of negotiations for a Free Trade Agreement with the United States in 2005, a number of progressive advisors resigned or found themselves out of job. They complained that that the president was easily swayed by more conservative advisors and the economic ministries.71 One advisor I interviewed argued that this contributed to the lack of clear policy ideas, and the president began to publicly doubt his ability to govern. “The president [Roh Moo Hyun] was emotionally very progressive but theoretically he didn’t have many strong ideas... after two years the progressives [were forced] out and 70 Colloquium with presidential policy advisor on real estate policy at Sungkonghoe University, November 2006. This was part of series of 11 talks organized by former and current Roh government reformers in which they discussed the problems of reform under the participatory government. 71 Various interviews, presidential advisors and reform politicians, December 2006- March 2007. 150 the other bureaucrats prepared the ways for faster decision making”72 After reformers in Roh’s ruling Uri Party failed to use their 59% majority in the National Assembly to push through a package of policies abolishing the National Security Law and reforming the private education system, the Roh government began to take a more conservative course – the President himself proposed a grand coalition with the conservatives – and a majority of progressive reformers were forced out of their advisory positions and replaced with more conservative and moderate segments of the reform bloc. After their departure, these reformers became more vocal and criticized the Roh regime for accelerating trade liberalization without having first secured the development of an adequate social safety net. Not all reformers from the progressive bloc resigned, however, and to some degree Roh attempted to retain support from progressives. For example, in April 2006, Roh promoted veteran feminist and democratic movement activist Han Myoung Sook to position of Prime Minister. Instead of a simple exodus of reformers, what remained in the ruling liberal progressive bloc was a delicate dialectic of voice and exit. Han Myoung Sook was formerly the Minister of Gender Equality (MOGE), a newer ministry that many feminist activists from the Democracy movement and after have joined. It was created in 2001 but its budget remained very small until 2005 when it grew to over 1 billion dollars as it became responsible for the administration of the government’s child care programs73. The participation of feminist reformers in the ministry was hotly debated among grassroots feminist organizations. On the one hand, feminist activists were pleased that the women’s movement had been recognized as a 72 Interview, ex-Presidential Economic Policy aide, January 2007. 73 The ministry’s history and budget can be found on the old website for the MOGE. 151 vital partner in creating government policy. Others feared that having members of the women’s movement administering state welfare and family programs – what some activists termed “state feminism” (Kim Kyoung Hee, 2002; cf. Brown, 2006) – might be used to legitimize the larger trajectory of neoliberal restructuring and undermine the feminist movement. They argued that progressive policy from government is more possible when the feminist movement is strong; at that point the government is more receptive. The MOGE is a more peripheral ministry compared to other ministries so womens’ groups may feel the need to make them powerful. When we pull back from the ministry, other ministries will pull back... But to do so means negotiating, for example getting the childcare policies is connected to womens issues, but it is not explicitly a feminist issue so there is a struggle and confusion and confrontation still going on. One of my seniors, she was the leader of Yeo Se Yeon [an organization of women in parliament] and now she is in the Bluehouse [the home of Korea’s president, similar to the Whitehouse]. It was easy to criticize when you are outside but now it is more difficult. She says there is a need for activists to engage the state. “State feminism” is necessary, because the state is the biggest patriarchal organization. We have to work on it but it is not easy...My position is that we need to know what the state is doing. Personally, I criticize the state feminist perspective but I have to work with them on a project basis.74 Han was thus sensitive that her position as Prime Minister could be used as an endorsement of policies that might roll back or privatize social services for women and expand gendered forms of irregular work. As progressives both within and outside of the government began to criticize the Roh administration for embracing trade liberalization, the Prime Minister found herself attempting to mediate between reformers from the 74 Interview, member of the Women’s Cultural Theory Group, Korean Women’s Development Institute, December 2006. This activist also argued that “Whoever takes the loss from neoliberalism has to walk through the valley of teardrops, it seems to be accepted that it is ‘zero-sum’ game.” Thus, for her it was important that the women’s movement oppose neoliberal policy. 152 ruling bloc while also consulting with critics and reformers outside of it.75 She eventually resigned quietly before the FTA was signed. This was a strategic move, as she later ran for the presidential candidacy of the reform forces that eventually emerged as the Democratic Party. Other reformers who had made the exodus, however, were more vocal in their criticisms of the policy changes by the Roh administration. Outside of the government, these reformers seemed to have more room to propose concrete solutions to some of the reform inertia they found within the Roh regime. A group of these reformers began to more openly advocate a transition to a Scandinavian-style economic model. “Because we still have a strong state, regulatory power, big corporations and strong labour, perhaps a European model is much more suitable for Korea. It is also good for enhancing democracy – it is better for the trade union movement to be institutionalized – and a buttress against market forces.”76 These suggestions also seemed to mediate some of the previous tensions between shareholder activists and industrial policy advocates by suggesting that corporate governance reform could be combined with industrial policy through a social compromise with the chaebol. We can make it [social compromise] a weapon that we can drive the chaebol group to a new model. Samsung can be [like] the Wallenberg group [a Swedish family conglomerate] but have them accept the minimum set rules of the rules of the market economy. They have to know what is wrong and what is right…77 Following the announcement of plans to negotiate a Korea-US free trade agreement, justified as a “pragmatic” choice by the government, advocates of a welfare state approach quickly saw this as a wrong direction for government policy. 75 Interview, reform activist, co-founding member of PSPD, January 2007. 76 Interview, pro-industrial policy reformer, SERI, December 2006. 77 Interview, former Presidential economic advisor, December 2006. 153 Lee Jeong Woo, a progressive economic reformer and Roh’s former chairman of the Presidential Policy Planning Commission, signalled the rift that had been created between Roh and his former advisors in an editorial in the national daily Hankyoreh newspaper. Lee himself has been highly critical of the economic inequality unleashed by the 1997 crisis (Lee JW, 2002) and wanted the government to move in the direction of a Scandinavian model. He felt that the hasty abandonment of social cooperation and the negotiation of a free trade agreement with the United States before an adequate social safety net could be put in place was the wrong direction for economic policy. The ‘‘Participatory Government’’ of Roh Moo-hyun has, over the last four years, worked in its own way to overcome a culture where ‘‘growth is everything’’ and ‘‘the market rules above all,’’ and I praise it for its efforts. The results have been a greater emphasis on harmony between growth, the re-distribution of wealth and the role of the public sector. Now, however, it is saying that it is suddenly going to trash that philosophy and go back to the familiar priorities of growth and the market. Put simply, it has turned to the right, and there ahead lies the cliff. Right now what is right for Korea is a greater turn towards the left. It is the Scandinavian social democratic model that has been judged the best of all the market economy experiments the human race has experienced so far. In public opinion surveys as well, it is the Scandinavian model that Koreans say they like the most. Though of course it would be difficult to move to that model right away, we should be gazing toward Scandinavia to get there. A free trade agreement with the U.S. means we are going to go in the wrong direction (Lee, 2006). The hasty negotiation of the FTA with the United States served to deepen divisions within the reform bloc. Labour and farmer groups especially became more vocal in their protests against the FTA. The embrace of the democratic demands of these groups had earlier helped the reform bloc offer an alternative to the regionalism of former governments. Without a strong social safety net to buffer trade liberalization, or an alternative to neoliberal reform, the regional boosterism and populist economic rhetoric of the conservative bloc began to gain support. 154 Criticism from prominent former advisors struck an ideological chord within the liberal-progressive bloc that spoke to tensions of the long decade discussed above. In anticipation of the fall 2007 presidential election, Roh’s governing party broke up in the national assembly, and reformers that remained on the pro-government side against the conservative opposition grouped together under the banner of the United New Democratic Party (UNDP). They made an effort to put forth a single candidate in the elections, but internally, they remained relatively divided into rival sets of ideas and strategies on where to go with future policy. In practice, the “pro-government” forces only remained united on the issue of continued peaceful engagement with the North, but nonetheless, attempts were made to present a cohesive alternative to Lee Myung Bak in the presidential race. To make their case, liberal forces argued that a unified front against the conservatives must be made in the election in order to avert a transition to conservative rule. They feared a conservative victory would isolate North Korea and roll back the clock on peace efforts, while also undermining progress in the six party talks. After North Korea’s nuclear tests in 2005, inter-Korean relations had only recently begun to look more stable following the inter-Korean summit in October, 2007. Politicians and intellectuals associated with the broad liberal-progressive bloc argued that the basis of unity for liberal forces here must be an advancement of a pro- engagement policy rather than an alternative economic vision, as liberal and progressive forces are more deeply divided on what such a vision should be. Thus the main call from the liberal camp was for a democratic centrism in opposition to conservative rule, rather than a nuanced and social-democratic alternative economic program. In the lead-up to elections key pro-engagement intellectuals took stabs back at those progressives who 155 chose not to remain in the party and support the pro-engagement priorities of the liberal reform bloc, asking if continued opposition to the FTA and the fight against neoliberalism should be the key priorities of the progressive movement. The point, however, is whether such a configuration [opposition to neoliberalism and the KorUS FTA] augurs well for overcoming the ’87 regime. The strengthening of the more radical progressive camp(s) in such an alignment will not be without its positive meanings. But there is an acute risk that an easy electoral victory for the conservative opposition, plus the existence of radical sects satisfied with mere quantitative expansion, may prolong and further embitter the downward slide of the ’87 regime in its final days. Precisely at this moment when room for unprincipled ‘middle of the road reformists’ has shrunk due to the conclusion of the FTA negotiations, we should bring about a regrouping of forces for progressive reform with ‘radical centrism’ as their main tenet—without of course, necessarily holding on to the term as an electoral slogan (Paik, 2007). These debates, in many ways, revealed that the twin priorities of the radical 1980s movement (for reunification and economic equality) had become disarticulated, and this tension was perhaps the most pronounced in the later days of the participatory government. Some observers saw irony in the defence of Roh’s neoliberalism by left nationalists. Roh had been elected after protests against the Status of Forces Agreement (SOFA) following a tragic accident involving US troops in 2002, and promised to act independently of the US government to advance reunification projects. However, his decision to send troops to Iraq created a rupture among reformers from the 386 generation, especially those affiliated with NL tendencies discussed above. These reformers were divided between those who saw Korea’s participation in the Iraq war as a necessarily evil for room to pursue engagement with the North and those who could not offer their consent to such a project. Another point of compromise for former left nationalists was the Kaesong Industrial Complex in North Korea, goods from which 156 South Korean trade negotiators attempted to get included in the trade deal with the US. The Suyu group, a collective of former democracy movement intellectuals critical of taking the nation as the basis for social struggle, criticized the reversal of the left nationalist position during FTA negotiations as a sign of the hypocrisy as well as a possible rupture within Korean nationalism. [S]ome activist groups in South Korea, whose identity is characterized by “national liberation,” are not leading the anti-U.S. movement, but standing by the government’s decision with “conditional support” at a time that calls for the strongest anti-US movement. They are willing to support a decision that allows the North Korean economy to find a way out, even if it means signing the U.S.- South Korea FTA. They also hope that this could be an opportunity to reduce the tension between the two Koreas and induce arms reduction, thereby cutting down the budget of national security and turning it into a resource that could resolve social polarization. Those who took an anti-U.S. [position] in the name of the nation and unification are now standing by the U.S. for the same cause. How can we understand this strange irony? If this is taken further, US-South Korea FTA may cause a rupture within the nationalist camps. How can we be certain that there will not be two nationalist dispositions: one, that of anti-U.S. and the other, that of a re-unification movement. In this case, U.S.-Korea FTA will also be remembered as the starting point that caused the nationalist camp to stir and split. If I take my concern one step further, this may be the threshold where the turn takes place from the typical modern assemblage of Korean nationalism into a right-wing ideology. Right- wingers in Korea were previously pro-U.S. anti-Communists with nothing to protect but their immediate interest; however, they may be replaced by typical right-wingers who are hailed by the nation. Is it so strange to imagine that these nationalists will take the place of conservatives in South Korea’s political geography? Is not the emergence of national liberation groups without an anti- U.S. sentiment a symptom that “nationalists not against the U.S. ,” if not “pro- U.S. nationalists” are beginning to gain importance in South Korean politics? (Yi and Ko, 2006, 7). While Yi and Ko use this rupture to criticize the basis of social struggles on a nationalist subject, their analysis of ruptures within the reunification bloc reveals that the tension between economic justice and reunification continues to animate the liberal progressive bloc. This problem continued into the December 2007 election. The lack of alternative 157 economic proposals to liberal and progressive campaigns allowed conservative forces to rob the liberal bloc of some of its fire by strategically supporting some pro-engagement policies, though not without some internal tension among hardliners in the conservative bloc. Only the Democratic Labour Party advocated a progressive stance on economic issues, though its leadership’s primarily nationalist orientation and somewhat antiquated silence on North Korean human rights issues overshadowed their policy proposals and cast their opposition to existing neoliberal arrangements with a more nationalist inflection than with a comprehensive alternative economic platform. Unfortunately, in the December 2007 elections, no party of the liberal-progressive bloc effectively resolved these concerns. In the end a larger coalition remained around pro-engagement candidates, but Lee Myung Bak won the election and the participatory government dissolved back into some of the competing tensions from which it arose. Conclusion What I have tried to do in this chapter is to show how the challenges involved in the reform of the Korean developmental state that were experienced during the participatory government speak deeply to embedded tensions that have been inherited from the democratic struggles of the 1980s. These tensions inform not only what if means to be progressive in terms of potential economic reforms that can be made to the Korean economy, but also the chance to put forward a viable alternative to the division system that does not exchange it’s priority as a matte
UBC Theses and Dissertations
The postdevelopmental state : the reconfiguration of political space and the politics of economic reform… Doucette, Jamie 2009
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