The 1997 Financial Crisis and the Changing Role of the State in Korea,The Korean Experience: The developmental state and the financial system

The major aim of this research is to investigate the changing role of the state in South Korea (henceforth Korea) after the financial crisis of 1997. Considering the complexity of Korean dynamics in this period, the change in financial systems and the country’s developmental state will be the main points of focus. In order to analyse the main focus of thesis, the research will be simply the process of answering to the questions of, “What has been essential to both state definition and finance in Korea?” and, therefore, “How essential is the state’s definition and the role of the state in finance when examining how far Korean state has changed in the aftermath of the 1997 financial crisis?” In this thesis the core question is this: “How has the Korean developmental state changed since the 1997 financial crisis? And has this change influenced the role of the state in finance as well as the structure of the state bureaucracy?” In Korea, as a representative structure of developmental states, the financial system was a kernel of the state-leading developmental plans; in other words, it is how the state could control over ‘capital’ and execute ‘industrial policy’ for the state’s aim of economic development. Two subordinate issues therefore need to be raised to figure out the outline of the process of the changing role of the state before and after the financial crisis: “Whether state’s purpose to reinstate its crucial role by restoring the attributes of a developmental state through the public fund after the 1997 crisis was successful or not” and “what was the direction of the financial supervision system reform after the 1997 financial crisis in Korea? And was the direction matched the goal pursued by the state?” Before the 1997 crisis, Korean developmental state had already been changing in many ways; the success of economic development raised the issue of different roles of the state to previous ‘strong’, ‘economy-centred’ and ‘coercive’ role of the state. However, it is true that the financial crisis accelerated this issue as a crucial subject of the developmental state theory. As Korea has been transformed to different types of state, changing roles of the state has been inevitably required after the financial crisis. Under this situation, this thesis will conduct some empirical researches to find answers to the main question and subordinate questions.