Alice Amsden made an important contribution to the literature on
development/South Korea. At the risk of oversimplifying that contribution
it was to forcefully demonstrate that the state played a decisive role in
the rapid growth and industrial transformation of South Korea. Her work
challenged that of neoliberals who had for years been claiming South
Korea's success was a result of free market forces.
However, Amsden's point was not just to show that the state was important
but to modify the conventional wisdom about development. She agreed with
mainstream economists that capitalism could work to promote third world
development. But rather than advocating the free market to achieve these
ends, she argued that we needed to promote South Korean style state
directed capitalist strategies. So, she really (and continues to) embrace
the South Korean growth model.
Many progressives followed her logic because they also wanted to
demonstrate the shallowness of neoliberalism. However, in doing so these
progressives overlooked the contradictions in the South Korean strategy.
That South Korea strategy was based on an import dependent export drive.
[South Korea has only run trade surpluses for 5 years, 1986-1990] That in
turn required access to Japanese technology and US markets. It also
depended upon labor repression to keep labor costs low. It was a forced
march that was externally supported and environmentally, socially, and
politically very costly. And by the late 1980s that strategy/model was
beginning to unravel.
The state began losing control over the large corporations it had
developed and supported with large loans. The corporations began
engaging in destructive speculation. The state began losing control over
the population, as people, especially workers, battled and won greater
rights. Moreover, neither Japan nor the US was willing to keep supporting
South Korean growth at their own expense. Japan began to withhold
technology. It also began to move to Southeast Asia where it set up
highly competitive export industries. The US demanded that South Korea
raise its currency and open its markets.
By the mid-1990s the South Korean economy was running bigger and bigger
trade deficits, its out of control corporations were losing money and
leaving the country to produce elsewhere, etc. Workers would not accept
state attempts to drive them backwards in terms of wages and working
conditions. Thus, the crisis did not come out of the blue.
Amsden in her editorial would have us believe that the South Korean
"miracle" could have been maintained if only the South Korean elite had
more forcefully resisted western inspired liberalization pressures. In
other words there was nothing wrong with the model; it was just that too
many South Korean economists and policy makers were duped by free market
ideology. I would argue that the government caved into those pressures
for more substantial reasons. For example, South Korea's corporate
controlled export drive needed Japan and the US. Moreover, the state
found itself unable to control the large corporations, etc. Thus, the
South Korean state had no choice but to allow more open markets, to accept
US demands, to allow the chaebol to speculate as well as invest outside
the country. All the state could do in a proactive way was to aim its
guns at domestic labor which it did energetically during the last few
years under the cover of continual red scares.
So, where does that leave us? The IMF intervention in South Korea is a
disaster for South Korean people. IMF demands will only make the country
more export dependent, more foreign dominated. IMF demands will only lead
to further repression of workers, etc. But because we oppose
neoliberalism does not mean that we should embrace a state strategy that
was also repressive and corrupt and in crisis.
We should take confidence from the South Korean experience that there are
effective alternatives to the free market. But we should not be surprised
to learn that state capitalist regulation of economic activity directed
towards profit maximization, as in South Korea, produces contradictions
and crisis. The debate has to be opened up. We need to be calling for
radical restructuring of the South Korean political economy, for the
creation of new forms of worker control and democratic social regulation
of economic activity as part of a transition process which must include
making the South Korean economy less export dependent, more domestically
centered, etc. Reunification is a part of this.
Meredith Cumings Woo's editorial is really coming from the opposite side,
blaming the crisis on the fact that financial markets were not liberalized
enough. Based on her past work it appears that she is willing to grant
that the state direction of economic activity was helpful to raise South
Korea's economy to moderate levels of development but to keep moving
forward the market needs to take over. Only market forces can minimize
corruption and ensure a rational allocation of capital. Amsden's point is
an important one here, however, the current crisis takes place after a
period when state control has indeed been reduced and market forces,
dominated by large chaebol and foreign investors and corporations, have
been strengthened. And it is hard to see how greater freedom for
domestic and foreign capital to move money and operations is going to
promote a more domestically centered, nationally controlled, worker
centered, stable economy.
Marty Hart-Landsberg
