Reinventing the Interventionist State: The Korean Economic Bureaucracy Reform under the Economic Crisis

Abstract

While market institutions experience extensive neoliberal reforms facing the exogenous pressure for economic openness and liberalization, what institutional changes have taken place within the old interventionist state apparatuses, especially the economic bureaucracies in the state‐led economies? This paper attempts to shed light on this question by analyzing the institutional reform process of the powerful South Korean economic bureaucracy, the Ministry of Finance and Economy (MOFE), in the aftermath of the Asian financial crisis in 1997. Drawing attention to the politics of the MOFE reform, this paper shows that the financial crisis opened a rare window of opportunity to the reformist political leader, President Kim Dae‐Jung. President Kim actively reinterpreted the challenges posed by the financial crisis and utilized them as a rationale for establishing a new agency, the Ministry of Planning and Budget (MPB) , to strengthen his reform initiative in post‐crisis Korea. Despite the façade of neoliberal ideals and slogans for deregulation, the essential goal of the key actors involved in the reform policy‐making process and the final institutional choices made by them were both a far cry from the retreat of the interventionist economic bureaucracy. The active political intervention in the process of bureaucratic institutional reform, as well as the evolution of the MPB's functions since the financial crisis, suggests that it is too simplistic to argue that the Korean interventionist state will simply wither away in the era of economic globalization.