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Bad Loans to Good Friends: Money Politics and the Developmental State in South Korea

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  • Kang, David C.

Abstract

Why has the literature on Asian development not addressed the issue of money politics in South Korea? How can we reconcile the view of an efficient developmental state in South Korea before 1997 with reports of massive corruption and inefficiency in that same country in 1998 and 1999? Politics is central to the answer. In this study I make two arguments. First, money politics was extensive in South Korea both during and after the high-growth era. Second, political—not economic—considerations dominated policymaking. This study explains both past and present and compares the patterns of money politics in the early post-independence era with those that arose after the democratic transition in 1987. While during the Park era a balance of power between businessmen and politicians kept corruption from spinning out of control, the transition to democracy altered the basic business-state relationship, allowing business to exert greater influence over policy decisions. The political hypothesis advanced in this study suggests a new direction for our research about the developmental state.

Suggested Citation

  • Kang, David C., 2002. "Bad Loans to Good Friends: Money Politics and the Developmental State in South Korea," International Organization, Cambridge University Press, vol. 56(1), pages 177-207, January.
  • Handle: RePEc:cup:intorg:v:56:y:2002:i:01:p:177-207_44
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    Cited by:

    1. Simeon D. Alder, 2016. "In the Wrong Hands: Complementarities, Resource Allocation, and TFP," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(1), pages 199-241, January.
    2. Gans-Morse, Jordan & Borges, Mariana & Makarin, Alexey & Mannah-Blankson, Theresa & Nickow, Andre & Zhang, Dong, 2018. "Reducing bureaucratic corruption: Interdisciplinary perspectives on what works," World Development, Elsevier, vol. 105(C), pages 171-188.
    3. Marcus Noland, 2007. "South Korea's Experience with International Capital Flows," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 481-528, National Bureau of Economic Research, Inc.
    4. Karo , Erkki & Kattel , Rainer, 2015. "Innovation Bureaucracy: Does the organization of government matter when promoting innovation?," Papers in Innovation Studies 2015/38, Lund University, CIRCLE - Centre for Innovation Research.
    5. Simeon Alder, 2009. "In the Wrong Hands: Complementarities, Resource Allocation, and Aggregate TFP," 2009 Meeting Papers 1265, Society for Economic Dynamics.
    6. Atindra Dahal, 2018. "An Appalling Scenario Growing Corruption and Its Obnoxious Impacts on Public Lives -With Special Reference of South-Asian Stigma," International Journal of Social Science Studies, Redfame publishing, vol. 6(5), pages 74-85, May.
    7. Bernard Yeung & Randall Morck & Daniel Wolfenzon, 2004. "Corporate Governance, Economic Entrenchment and Growth," Working Papers 04-21, New York University, Leonard N. Stern School of Business, Department of Economics.
    8. Li Li & Ning Niu & Xiaojian Li, 2021. "Factors Affecting the Long-Term Development of Specialized Agricultural Villages North and South of Huai River," Land, MDPI, vol. 10(11), pages 1-13, November.
    9. Christina Lai, 2018. "Economic Nationalism in South Korea and Taiwan: Examining Identity Discourse and Threat Perceptions towards Japan after the Second World War (1960s–1970s)," Journal of Asian Security and International Affairs, , vol. 5(2), pages 149-171, August.
    10. Sea Jin Kim & Woo-Kyun Lee & Jun Young Ahn & Wona Lee & Soo Jeong Lee, 2021. "Analysis of Developmental Chronology of South Korean Compressed Growth as a Reference from Sustainable Development Perspectives," Sustainability, MDPI, vol. 13(4), pages 1-22, February.
    11. Dorottya Sallai & Gerhard Schnyder, 2015. "Strong State, Weak Managers: How Firms Cope with Autocracy in Hungary," Working Papers wp474, Centre for Business Research, University of Cambridge.
    12. Neil Campbell & Shrabani Saha, 2013. "Corruption, democracy and Asia-Pacific countries," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 18(2), pages 290-303.
    13. Sen, Kunal, 2013. "The Political Dynamics of Economic Growth," World Development, Elsevier, vol. 47(C), pages 71-86.
    14. Shrabani Saha & Kunal Sen, 2019. "The corruption-growth relationship: Do political institutions matter?," WIDER Working Paper Series wp-2019-65, World Institute for Development Economic Research (UNU-WIDER).
    15. Stijn Kuipers, 2021. "Rethinking anti-corruption efforts in international development," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 29(4), pages 1370-1381, October.
    16. Chiu, Ming Ming & Joh, Sung Wook, 2004. "Bank Loans to Distressed Firms: Cronyism, bank governance and economic crisis," CEI Working Paper Series 2004-2, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    17. Tarverdi, Yashar & Saha, Shrabani & Campbell, Neil, 2019. "Governance, democracy and development," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 220-233.
    18. Wang, Yuanyuan & You, Jing, 2012. "Corruption and firm growth: Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 415-433.
    19. Sallai, Dorottya & Schnyder, Gerhard, 2020. "What is “authoritarian” about authoritarian capitalism? The dual erosion of the private-public divide in state-dominated business systems," LSE Research Online Documents on Economics 102943, London School of Economics and Political Science, LSE Library.
    20. James Wang, 2010. "The Political Economy of Collective Labour Legislation in Taiwan," Journal of Current Chinese Affairs - China aktuell, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 39(3), pages 51-85.
    21. Laurids S. Lauridsen, 2014. "Governance and Economic Transformation in Taiwan: The Role of Politics," Development Policy Review, Overseas Development Institute, vol. 32(4), pages 427-448, July.

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