Neo-Liberalization and Incorporation in Advanced Newly Industrialized Countries: A View from South Korea
| Author | Tat Yan Kong |
| Date | 01 March 2004 |
| DOI | 10.1111/j.1467-9248.2004.00462.x |
| Published date | 01 March 2004 |
| Subject Matter | Article |
Neo-liberalization and Incorporation
in Advanced Newly Industrialized
Countries: A View from South Korea
Tat Yan Kong
School of Oriental and African Studies, University of London
Historically closely associated with interventionist growth strategies, the demise of corporatism was
widely predicted as neo-liberalism became the dominant economic paradigm from the late 1970s.
The experience of social dialogue and social pacts in continental Europe during the 1980s and 90s,
however, suggests that corporatism may have found a new economic purpose in the era of neo-
liberalism. Similarly, in the developing world, the intellectual aversion to government accommo-
dation of ‘special interest groups’ that accompanied the early phase of economic liberalization has
given way to a more sophisticated appreciation of the economic advantages of social compromise.
Using the case of South Korea, a country that recently established a social pact in support of its
economic liberalization drive, this paper seeks to extend our knowledge about the compatibility
between neo-liberalism and incorporation. The results contribute to the wider debate about the
possibilities of diverse patterns of government–business–labour relations under ‘actually existing’
neo-liberalism. As one of the most advanced and successful newly industrialized countries, South
Korea shares structural–institutional affinities with both advanced and developing societies. Hence,
it represents an intermediate case of relevance to both the mature European and ‘third wave’
democracies.
Corporatism can be defined as a bipartite or tripartite relationship of cooperation
between the representatives of government, business and organized labour, the
purpose of which is to achieve economic or social results that cannot be delivered
by the market alone. Based on the exchange of material and other favours (such
as self-restraint), corporatist relationships can operate at the national (macro),
sectoral (meso) or firm (micro) levels.1Their aims and results can be market-
conforming or market-distorting. Historically closely associated with intervention-
ist growth strategies, corporatism’s demise was widely predicted as neo-liberalism
became the dominant economic paradigm from the late 1970s. The experience of
social dialogue and social pacts in continental Europe during the 1980s and 90s,
however, suggests that corporatism may have found a new economic purpose
within the neo-liberal economic model. Far from being eclipsed, European corpo-
ratism metamorphosed from the 1970s social-democratic version into ones com-
patible with global neo-liberal trends. Similarly, in the developing world, the
intellectual aversion to government accommodation of ‘special interest groups’ that
accompanied the early phase of economic liberalization has given way to a more
sophisticated appreciation of the economic advantages of social compromise. Using
the case of South Korea (hereafter Korea), a country that recently established a
social pact in support of its economic liberalization drive, this paper extends exist-
ing knowledge about the compatibility between neo-liberalism and incorporation.
The results contribute to the wider debate about the possibilities of diverse patterns
POLITICAL STUDIES: 2004 VOL 52, 19–42
© Political Studies Association, 2004.
Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
20 TAT YAN KONG
of government–business–labour relations under ‘actually existing’ neo-liberalism.
As one of the most advanced and successful newly industrialized countries, Korea
shares structural–institutional affinities with both advanced and developing
societies. Hence, it represents an intermediate case of relevance to both the
European and ‘third wave’ democracies.
The Persistence of Corporatism
After its heyday in the ‘golden age’ of Western capitalism (1945–75), European
corporatism was expected to decline along with the economic interventionism it
was set up to support.2Financial liberalization during the 1980s removed the most
powerful economic instrument (pro-industrial financial controls) of the social-
democratic project3that was the justification for corporatist cooperation. Other
trends of the 1980s and 90s (easy relocation of production, intensified trade com-
petition, new technologies, and transfer of economic rule-making from national to
international arenas) reinforced the erosion of the common social-democratic
purpose (see, for example, Streeck and Schmitter, 1991). Constrained by these new
trends, erstwhile social partners repudiated corporatist settlements. In pursuit of
more flexible labour forces, employers repudiated centralized wage bargaining, a
core feature of the corporatist settlement, a move sometimes supported by sections
of labour that stood to benefit from decentralization. The transition was facilitated
by the simultaneous turn towards fiscal discipline and corresponding retrenchment
of the social benefits traditionally exchanged for labour union cooperation.
In contrast to the consensual or ‘societal’ corporatisms of Europe, the state-
dominant or authoritarian corporatisms of the developing world (notably of Latin
America and East Asia) allowed no independent labour voice. Essentially instru-
ments for legitimizing labour control by state–business alliances, these arrange-
ments collapsed under the ‘third wave’ of democratization in the 1980s. In many
such democracies, disillusionment with statist economics and the failure of alter-
natives to neo-liberalism paved the way for the electoral rise of a new breed of
charismatic leaders dedicated to the neo-liberal cause. Swept to power by ‘neo-
liberal populism’ (Weyland, 1999), these leaders eschewed social partnership
between organized interests in favour of reform led by insulated technocracies.
Corporatism was discredited not merely by its association with the economic failure
of dirigisme. The claim made by some influential empirical studies that labour
lacked the capacity to affect the implementation of economic restructuring (see,
for example, Nelson, 1990, pp. 349–51) also cast doubt on the practical necessity
of social accommodation. Intellectually, corporatism was inconsistent with the
emphasis on ‘market-supporting institutions’ that accompanied Third World
economic liberalization. Foremost amongst such market-supporting institutions
were the rule of law and responsible pluralism (or civil society). For example, the
World Bank claimed that interest groups could facilitate ‘good governance’
whereas ‘special’ interest groups hindered public accountability (World Bank,
1992, pp. 11–12, 41). Corporatism, by granting special access to selective organized
interests, was clearly an instance of the latter.4
The persistence of old corporatist institutions in Germany and Japan has been inter-
preted by some as symptomatic of the stasis of coordinated market economies
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