Hegemonic ideas versus Institutional ethos in Korea's neoliberal reform during the late 1990s economic crisis

This study uses the historical case of the late 1990s economic crisis in Korea to explore the encounter between exogenous neoliberal doctrines and the endogenous "developmental" policy ethos. It investigates to what extent the neoliberal policy frame was institutionalized to change the developmental regulatory structure. The discourse of "moral hazard" mediated the acceptance of the harsh International Monetary Fund programs in such a way that neoliberal norms were espoused as the legitimate tools to cure "inefficient" developmental policy arrangements. The far-reaching restructuring aimed to make the system conform to the Western market economy model and was guided by major reform agendas such as small government, fiscal austerity, bank autonomy, strict capital adequacy, corporate transparency, capital liberalization, and labor flexibility. Tracing the implementation of these agendas revealed two primary contexts for incomplete neoliberal transition under the developmental institutional legacies. First, pragmatic policy orientation framed market adjustment as a national project, empowering the government to achieve immediate economic and political stability. Financial reform to build market discipline led to more integrated authority and expanded the domains of supervision by the government. Pursuing small-government reform failed due to the organizational culture and strong policy leadership of the closed, rank-based bureaucracy. Second, the political and economic incentives to protect major large conglomerates (chaebols) and organized labor compromised the market adjustments. Reforming the structures and practices of the chaebols was limited because they were still the core players in the Korean economy. The initiative to promote labor flexibility deepened labor market segmentation, widening the gap among workers by firm size and unionization. The agenda of capital liberalization led to the successful implementation by making financial institutions more susceptible to the growing influence of foreign shareholders and investors. The Korean experience shows that highly legitimate neoliberal values in the policy discourse were rearticulated, compromised, or abandoned within the local policy institutions. The post-crisis reform entailed excessive government intrusion and the mobilization of passive private sectors with the persistence of the enduring developmental ethos to guide the government-market relationship.Ph. D.Includes bibliographical referencesby Oh-Jung Kwo