Political economy of industrial transformation a case study of the development of an automobile industry in Korea /

by 1961- Lee, Moon-Soo

The automobile industry in developing countries has been led by a few transnational corporations. There is one significant exception to this rule: the Korean automobile industry. Not only has the Korean automobile industry, within a relatively short time span, increased its production capacity to the level of advanced nations, but has also been able to maintain managerial independence over its developmental period by producing its indigenously-designed models. However, a careful examination reveals that the process of auto industrialization in Korea has been characterized by the variances of performance across not only different periods but also different companies. Contending paradigms cannot successfully explain such variances. For them, either the market-confirming initiative of private capital or market-distorting and top-down state policies seem to be a decisive factor in determining Korea's successful automobile industrialization. The variances of performance over time are explained in this study by what type of coalition between state managers and local firms prevails at a specific time. Two types of coalitions are highlighted: (1) the neomercantilist coalition made between the nationalist section of state managers and independent-oriented local firms and (2) the liberal coalition made between liberal-minded economic bureaucrats, stability-oriented political leaders and TNC-dependent local firms. To explain the dynamism of coalitional politics, I examine the structures governing industrial policymaking processes in Korea. Specific attention is paid to the insulation of the Ministry of Commerce and Industry from other economic ministries, particularly from the Economic Planning Board, to the organizational and financial prowess of individual local firms, and to the characteristics of state-business nexus. It is also pointed out that these institutional structures are not constant, but shifting as a result of previous industrial policies and the performance of the automobile industry. With this theoretical model, I examine the history of the Korean automobile industry, dividing it into six periods on the basis of the varying performance of the industry over time. One critical implication comes from this study. The achievement of the Korean auto industry is very precarious one. Once there appears the crack in the neomercantilist coalition, the degeneration of the Korean automobile is inescapable.