Economic and Social Consequences of Globalization: The Case of South Korea

Abstract

Only a while ago, the South Korean economy was the envy of the developing world, and its success was scrutinized by numerous analysts, with most agreeing that the secret of this success was a judicious mix of the state and the market. However, the exact mix of the state and the market has undergone through some changes, with, in particular, a steady, albeit gradual and patchy, move toward liberalization since the early 1980s; the impact of this on the labor market and social policy is not easily observable in the Korean case because of the very gradual nature of the process. The liberalization took a serious turn only a few years ago with a series of measures concerning capital accounts; the end result was the catastrophic financial crisis of 1997–8, which, no doubt, will have profound effects on the labor market and social policy for years to come. In this chapter, the overall developments in the political economy of Korea since 1980 are reviewed, with a focus on the connections among liberalization policies, the macroeconomic and labor market developments, and the social consequences. The chapter is organized as follows: the first section analyzes the political economy of liberalization in Korea – how it happened, why it happened, and why it went wrong; the second section describes the macroeconomic developments in the era of liberalization; the third section takes a closer look at the labor market, discussing changes in wage inequalities; the next section examines problems of social policy; this is followed by conclusions and recommendations.