Chapter 9: The Political Economy of the Korean Model
1. INTRODUCTION The object of this chapter is to examine the political economy of the Korean model, summarizing the relevant parts of previous chapters, and then consider its prospects in light of the 1997 crisis. Section 2 reviews the institutional arrangement that had bred the seeds of eventual catastrophe, Section 3 examines the ﬁnancial crisis in Korea that invited the IMF intervention on November 23, 1997, Section 4 examines the metaphor of rulers as robbers, Section 5 describes the aspect of predatory pseudo-democracy in Korea and the last section gives concluding remarks on economic and political prospects of the Korean model. 2. THE SEEDS OF EVENTUAL CATASTROPHE The major policy measures that were adopted by the Korean government in pursuing the export-oriented growth strategy were subsidized credit rationing, preferential tax treatments, selective import restrictions, socialization of business risk, and vigorous administrative support. In due course, the politicians and bureaucrats came to wield great inﬂuence upon the fate of individual ﬁrms and entrepreneurs. Under the late President Park’s regime (1961–79), any entrepreneur could automatically attain access to short-term bank credits at subsidized interest rates by undertaking export-related activities. Firms engaged in export activities could also receive favorable treatment, though less automatic, in the allocation of low-cost long-term domestic and foreign loans (which received government repayment guarantees). Also the other subsidy measures such as preferential tax treatments were more or less streamlined in proportion to export performance. Consequently, the eﬃciency of credit rationing and other subsidy measures was maintained...
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