Summary Core Reading 2
East Asian Politics
Tom ANDRE WINDSOR
Stephan Haggard and Chung-in Moon. 1993. “The State, Politics, and Economic ​
Development in Postwar South Korea.” In Hagen Koo ed., State and Society in ​
Contemporary Korea. Chapter 2 (pp. 51-93; focus on pp.51-80).
This article, written by Stephan Haggard and Chung-in Moon (1993), analyzes Korea’s rapid
economic development in the post-war period. The authors argue that it cannot be solely
explained by the market, cultural factors, or state intervention, and propose three interlinked
political economic explanations: the international context, state-society relations, and the nature
of state institutions
The international context shaped South Korea’s economic policy in different ways. In the context
of the Cold War, South Korea relied heavily on the United States military protection and
economic assistance, but also on global market integration. Another major actor was Japan,
which became, after the normalization of relations in 1965, an important provider of investment
and technology.
Meanwhile, the Korean government actively shaped the business sector by providing for large
conglomerates (chaebol) while firmly controlling them. At the same time, the government
limited labor representation to keep wages low and stay competitive. These policies could be
effectively put in practice thanks to strong bureaucratic institutions like the Economic Planning
Board (EPB).
The authors follow up with an analysis of the distinctive temporal phase of economic
development. The first phase of postwar reconstruction was characterised by political instability
and the Korean War, while being heavily reliant on US foreign aid. At the same time,
State–business relations were characterized by corruption and weak industrial policy. The second
phase included the military coup and the developmental state of Park Chung-hee, characterized
by a military regime with centralized political authority. This allowed key reforms such as the
creation of the economic planning board and the nationalization of banks, enabling the
government to direct investment and credit. The regime shifted from import substitution to
export-oriented industrialization, meanwhile the government also developed a strategic alliance
with a large firm. Heavy and chemical industrialization characterizes the third phase of
developing strategic industries such as steel and shipbuilding. The last period, from the end of
the 70s to the end of the 90s, shows the progressive democratization of the country due to
emerging social pressure, but is also marked by new policy challenges such as labor demand and
inflation, and most importantly, the crisis and adjustment like oil shocks.