Analyses & Alternatives (분석과 대안)

Korea Consensus Institute(KCI) (사단법인 코리아컨센서스연구원)
권호 표지

Politics of State-led Microcredit under the Lee Myung-bak Administration: State Autonomy, Capacity, and Outcomes

  • Choi, Jongho (The Institute for Democracy and Yonsei University) ;
  • Jung, Heon Joo (The Institute for Democracy and Yonsei University)
  • Received : 2019.12.28
  • Accepted : 2020.03.25
  • Published : 2020.03.30
Download PDF
⟨ Previous Next ⟩

Abstract

In the 2000s, financial exclusion of low-income people emerged as a major social problem in South Korea. Microcredit business was first introduced by NGOs to help the poor overcome poverty while the Korean government soon chose to initiate microcredit policies to assist financially marginalized low-income people as a key policy measure to alleviate social inequality and revitalize economy. Unlike the initial expectation that state intervention in microcredit industry would be more effective, the outcome has been much less impressive. This paper aims to examine the poor performance of state-led microcredit in South Korea during the period of Lee Myung-bak administration by employing the concepts of state autonomy and capacity. It finds that the state autonomy, a key characteristic of a developmental state, was high in the sense that the funds had been raised in the face of strong resistance from private financial institutions. Lack of state capacity such as low technocratic expertise and politicization of microcredit policy, however, turned out to be a major stumbling block to the state-led microcredit in South Korea. This study shows that although the Korean government still has strong willingness to intervene in the financial market even in the face of interest groups' opposition, the eventual success of state action largely depends on its capacity to effectively implement financial policies.

Keywords

References

  1. Ahlin, C., Jocelyn L. and Maio, M. (2011). Where does Microfinance Flourish? Microfinance Institution Performance in Macroeconomic Context. Journal of Development Economics, 95(2): 105-120. https://doi.org/10.1016/j.jdeveco.2010.04.004
  2. Amsden, A. H. (1989). Asia's Next Giant : South Korea and Late Industrialization. New York: Oxford University Press.
  3. Bateman, M. (2010). Why doesn't Microfinance Work? The Destructive Rise of Local Neoliberalism. New York: Zed Books.
  4. Bateman, M. (ed). (2011). Confronting Microfinance: Undermining Sustainable Development Sterling: Kumarian Press.
  5. Bateman, M. and Chang, H. (2012). Microfinance and The Illusion of Development: from Hubris to Nemesis in Thirty Years. World Economic Review, 1(1): 13-36.
  6. Cabraal, A., Russell, R. and Singh, S. (2006). "Microfinance: Development as Freedom." In Banking and Identity Conference.
  7. Chang, K. (2010). "Proletarianizing the Financial Crisis: Jobless Industrial Restructuring and Financialized Poverty in Post-Crisis South Korea." In: First International Conference in Political Economy of the IIPPE. Rethymno, Greece.
  8. Choi, B. (1993). "Financial Policy and Big Business in Korea: The Perils of Financial Regulation." In The Politics of Finance in Developing Countries, ed. S. Haggard, C. H. Lee and S. Maxfield. Ithaca: Cornell University Press.
  9. Choi, J. and Jung, H. J. (2013). "Financial Globalization and Financial Exclusion: The Political Economy of Microcredit Policy in East Asia (in Korean)." : In 2013 KAIS Summer Convention. Busan, South Korea.
  10. Deyo, F. C. (ed). (1987). The Political Economy of the New Asian Industrialism. Ithaca: Cornell University Press.
  11. Evans, P. B. (1995). Embedded Autonomy: States and Industrial Transformation. Princeton: Princeton University Press.
  12. Ha, Y., and Lee W. H. (2007). The Politics of Economic Reform in South Korea: Crony Capitalism after Ten Years. Asian Survey, 47(6): 894-914. https://doi.org/10.1525/as.2007.47.6.894
  13. Haggard, S. (1990). Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries. Ithaca: Cornell University Press.
  14. Haggard, S. and Kaufman, R. R (eds). (1992). The Politics of Economic Adjustment: International Constraints, Distributive Conflicts, and The State. Princeton: Princeton University Press.
  15. Hermes, N. and Lensink, R. (2007). The Empirics of Microfinance: What Do We Know?. The Economic Journal, 117(517): F1-F10. https://doi.org/10.1111/j.1468-0297.2007.02013.x
  16. Hundt, D. (2009). Korea's Developmental Alliance: State, Capital and the Politics of Rapid Development. London: Routledge.
  17. Johnson, C. A. (1982). MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford: Stanford University Press.
  18. Jung. H. J., Choi, J. and Park G. (2018). "Financial Exclusion and Social Mobility: The Current Status and Challenges of Microcredit Policy in South Korea(in Korean)." In Moon M. J., Jung H. J., Bae, J. Y., Moon, S. S, Baik J.M. and Hwang C. H. (eds). The Leadership of The Presidents of ROK and State Transformation. Goyang: Bubhyun Press.
  19. Kalinowski, T. and Cho, H. (2009). The Political Economy of Financial Liberalization in South Korea: State, Big Business, and Foreign Investors. Asian Survey, 49(2): 221-242. https://doi.org/10.1525/as.2009.49.2.221
  20. Kim, N. (2010). The Issues and Challenges of Smile Microcredit (in Korean). Hwanghae Review, 66: 335-349.
  21. Lee, H. H., Lee M. and Park, D. (2012). Growth Policy and Inequality in Developing Asia: Lesson from Korea. Economic Research Institute for ASEAN and East Asia (ERIA).
  22. Lee, S. J. and Han, T. (2006). The Demise of 'Korea, Inc.': Paradigm Shift in Korea's Developmental State. Journal of Contemporary Asia, 36(3): 305-324. https://doi.org/10.1080/00472330680000191
  23. Lew, S. C. and Wang, H. S. (2007). Did the Financial Crisis Transform the Developmental State? Focused on the Public Fund in Korea (in Korean). Korean Journal of Sociology, 41(5): 64-97.
  24. Leyshon, A. and Thrift, N. (1995). Geographies of Financial Exclusion: Financial Abandonment in Britain and the United States. Transactions of the Institute of British Geographers, 20(3): 312-341. https://doi.org/10.2307/622654
  25. Lim, H. (2010). The Transformation of the Developmental State and Economic Reform in Korea. Journal of Contemporary Asia, 40(2): 188-210. https://doi.org/10.1080/00472331003597547
  26. Lim, H. C. and Jang, J. H. (2006). Neo-liberalism in Post-crisis South Korea: Social Conditions and Outcomes. Journal of Contemporary Asia, 36(4): 442-463. https://doi.org/10.1080/00472330680000281
  27. Minns, J. (2001). Of Miracles and Models: The Rise and Decline of the Developmental State in South Korea. Third World Quarterly, 22(6): 1025-1043. https://doi.org/10.1080/01436590120099777
  28. Park, S. Y. (2012). Exploring Korea's Emerging 'Post Developmental' State: Research Trends and Agendas since the 1990s (in Korean). Comtemporary Politics, 5(1): 63-90.
  29. Pirie, I. (2005). The New Korean State. New Political Economy, 10(1): 25-42. https://doi.org/10.1080/13563460500031172
  30. Pirie, I. (2008). The Korean Developmental State: From Dirigisme to Neo-liberalism. New York: Routledge.
  31. Stubbs, R. (2009). What ever Happened to the East Asian Developmental State? The Unfolding Debate. Pacific Review, 22(1): 1-22. https://doi.org/10.1080/09512740802650971
  32. Stubbs, R. (2011). The East Asian Developmental State and the Great Recession: Evolving Contesting Coalitions. Contemporary Politics, 17(2): 151-166. https://doi.org/10.1080/13569775.2011.565983
  33. Wade, R. (1990). Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton: Princeton University Press.
  34. Wade, R. (2000). Wheels within Wheels: Rethinking the Asian Crisis and the Asian Model. Annual Review of Political Science, 3(1): 85-115. https://doi.org/10.1146/annurev.polisci.3.1.85
  35. Weiss, L. (1998). The Myth of the Powerless State. Ithaca: Cornell University Press.
  36. Weiss, L. (2005). The State-augmenting Effects of Globalisation. New Political Economy, 10(3): 345-353. https://doi.org/10.1080/13563460500204233
  37. Wong, Joseph. (2004). From Learning to Creating: Biotechnology and the Postindustrial Developmental state in Korea. Journal of East Asian Studies, 4(3): 491-517. https://doi.org/10.1017/s1598240800006056
  38. Woo-Cumings, M. (1995). "Developmental Bureaucracy in Comparative Perspective: The Evolution of the Korean Civil Service." In H.-K. Kim, M. Muramatsu, T. J. Pempel and K. Yamamura (eds). The Japanese Civil Service and Economic Development: Catalysts of Change. Oxford: Clarendon Press.
  39. Woo-Cumings, M. (1999). The Developmental State. Ithaca: Cornell University Press.
  40. Yim, E. E. and Park, E. J. (2010). Policy Changes on the Microcredit in Korea (in Korean). The Journal of Korea Contents Association, 13(1): 234-246. https://doi.org/10.5392/JKCA.2013.13.01.234
  41. Yoon, Y. (2010). Optimal Strategies for the Development of Microfinance in Korea for the Development of Microfinance, University of Illinois-Urbana-Champaign.
  42. Yunus, M. (1998). Poverty Alleviation: Is Economics Any Help? Lessons from The Grameen Bank Experience. Journal of International Affairs-Columbia University, 52: 47-66.