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of complex systems. He applied this regimented military knowledge to his new economic policy of “exportoriented industrialization.” Inspired by the rapid military industrialization of the Japanese colony of Manchukuo, which he had witnessed as an officer in the Manchukuo imperial army, Park envisioned a period of rapid industrialization in South Korea aided by the expert guidance and resource assistance of planners in the central government. He and his advisers believed that unfettered competition and open financial markets would destroy South Korean businesses’ opportunities to grow into powerful cartels that could compete against established Western companies in the global economy. One of Park’s first accomplishments was nationalizing the banking sector so that the state would be the sole source of investment funds in the country. Next, he turned to the task of securing the business alliances that he needed to make his vision a reality. To do this, his administration engaged in some friendly extortion. Park’s subordinates rounded up the wealthiest businessmen in South Korea and threatened them with fines and jail time if they would not comply with the state’s industrialization plans. 9 Many savvy businessmen accepted this plea bargain and cemented their status as protected members of society. With the business community in his pocket and the engine of financial investment in the service of the state, Park then rallied South Koreans around his policies with mantras that promised “nation-building through export” and “helping those [industries and firms] who help themselves.” The South Korean government then proceeded to “help the industries and firms that helped themselves” by INDUSTRIAL POLICY 97
helping the politicians who protected them to succeed in the political arena. Park’s adoption of export-oriented industrialization in South Korea effectively changed the South Korean government into the board of directors for “Korea Inc.” The government gave wealthy businessmen, academics, and government officials a voice in the biggest planning agencies in South Korea. These interest groups coordinated their efforts to build up the country’s industrial capabilities and to catapult it into the ranks of the modern, developed economies. A 1973 shift to investment in heavy industry and chemicals only cemented the economic might of family-owned South Korean cartels, called chaebols, at the expense of the working Koreans who paid higher prices for domestic goods. Agencies such as the Economic Planning Board and the Ministry of Trade and Industry used their arsenal of targeted subsidies, import restrictions, loan guarantees, and licensing requirements to strengthen the most promising South Korean businesses and “infant industries.” The exchange of favors flowed freely between businesses and the politicians that helped them; corruption, bribery, favoritism, and clientelism dominated South Korean industrial policy. 10 There existed a dense <strong>web</strong> of personal contacts that exchanged private money for political favors: chaebols rewarded government agents with handsome donations in exchange for public loans and sweetheart deals. Government agents in South Korea sometimes cut out the middleman and directed the benefits straight to themselves: the Park administration kept around 10 percent of all public loans for personal and political uses. 11 98 LIBERALISM AND CRONYISM
Page 1 and 2:
LIBERALISM AND CRONYISM Two Rival P
Page 4 and 5:
LIBERALISM AND CRONYISM: TWO RIVAL
Page 6:
CONTENTS Introduction 1 Chapter 1:
Page 10 and 11:
INTRODUCTION People often see polit
Page 12 and 13:
who have the power to make decision
Page 14 and 15:
CHAPTER 1: LAYING A FOUNDATION Befo
Page 16 and 17:
hijacking of the term to describe a
Page 18 and 19:
esources can be taken from some for
Page 20 and 21:
suffers from “market failure,”
Page 22:
is a group of cronies in a dictator
Page 25 and 26:
ecause it permits voluntary exchang
Page 27 and 28:
people’s economic well-being. The
Page 29 and 30:
consumer demands. Examples of rent-
Page 31 and 32:
the Politburo and the needs of conn
Page 33 and 34:
consider the benefits and costs of
Page 35 and 36:
upon state privilege and disproport
Page 37 and 38:
their loyalty to the socialist stat
Page 39 and 40:
cronyism from gripping every area i
Page 41 and 42:
communism are well documented and w
Page 43 and 44:
Accountability was embodied by refo
Page 45 and 46:
despite comprising only 3 percent o
Page 48 and 49:
CHAPTER 5: FASCISM Fascism, the pol
Page 50 and 51:
use the sword of the Nazi state to
Page 52 and 53:
planners created a back door for in
Page 54 and 55:
CHAPTER 6: CORPORATISM Corporatism
Page 56 and 57: puts men and their possibilities in
Page 58: that this form of guided capitalism
Page 61 and 62: therefore provide sufficient benefi
Page 64 and 65: CHAPTER 8: PROGRESSIVISM Progressiv
Page 66 and 67: people who argue for limited govern
Page 68: Security, Medicare, and Medicaid do
Page 71 and 72: the direct election of senators, ch
Page 73 and 74: argue for narrow individual interes
Page 75 and 76: their roots to diverse sources of i
Page 77 and 78: promises to assume a company’s de
Page 79 and 80: enefits for his former venture capi
Page 81 and 82: prices of firms within the textile
Page 83 and 84: ment the power to make decisions an
Page 85 and 86: of social justice, cronyism has an
Page 87 and 88: for women in the twentieth century,
Page 89 and 90: ecause it advocates granting these
Page 91 and 92: should pay the same as comparable b
Page 93 and 94: way, the US government replaced the
Page 95 and 96: an individual, social justice advoc
Page 98 and 99: CHAPTER 12: CRONY CAPITALISM AND DE
Page 100 and 101: subsidies, political connections di
Page 102 and 103: CHAPTER 13: INDUSTRIAL POLICY The t
Page 104 and 105: “cottage industries” that clust
Page 108 and 109: South Korean industrial policy gave
Page 110: The degree to which Japan’s and S
Page 113 and 114: to get involved in lobbying to prot
Page 116 and 117: CHAPTER 15: LIBERALISM VERSUS CRONY
Page 118: that power will arise with another
Page 121 and 122: with power support each other to ma
Page 123 and 124: an incentive to cooperate for the b
Page 125: environmental movement often advoca
Page 129 and 130: 6. Ludwig von Mises, Human Action,
Page 131 and 132: 12. James Heinzen, “The Art of th
Page 133 and 134: CHAPTER 5: FASCISM 1. Peter Temin,
Page 135 and 136: CHAPTER 8: PROGRESSIVISM 1. Terry L
Page 137 and 138: 16. Bruce Yandle, “Bootleggers an
Page 139 and 140: 3. Eamonn Fingleton, “Japan’s I
Page 142 and 143: FURTHER READING Acemoglu, Daron and
Page 144 and 145: ABOUT THE AUTHORS Randall G. Holcom
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