The Impact of Neo‐liberalism on South Korea's Public Pension: A Political Economy of Pension Reform

Abstract

AbstractThis article examines the recent Korean pension reforms from a political economy perspective. It argues that these reforms are of particular interest because, unlike major pay‐as‐you‐go pension schemes in Europe, the Korean pension scheme is a funded one and, therefore, is subject to market exposure. Also in contrast to the problems that public pension reforms have encountered in European and other OECD countries, especially ‘blame avoidance’, the more radical Korean reforms were implemented without significant challenge or resistance. First of all, the National Pension Scheme is described prior to the 1997 Asian economic crisis. Then the impact of this crisis on the Korean welfare state and, especially, its pension system are analysed. The main part of the article consists of a political economy of the pension reform process, in which the key roles of the international governmental organizations and the domestic neo‐liberal policy elite are pinpointed. This neo‐liberal ideology was critical in developing and sustaining an influential discourse on the ‘crisis’ in Korea's national pension fund. The article concludes by arguing, against the neo‐liberal tide, for the inclusion of a pay‐as‐you‐go element in the national pension in order to tackle escalating poverty in old age.