The Market's Revolt in the Dilemma between Weak Market Capabilities and Weak State Capacities: The Korean Case of Corporate Restructuring

Abstract

In the process of overcoming the economic crisis, Korea's liberal market reform had not meant the retreat of the state from the market by intervening in industrial and financial restructuring of liquidation, workouts, mergers, and business swaps. Despite this state intervention, the developmental state had shown the limits of state capacities in implementing the state-led corporate restructuring in the wake of political democratization and economic liberalization. Therefore, this study will solve the puzzles of why the so-called ‘strong’ state fell into the dilemma between weak market capabilities and weak state capacities, and particularly of how the government could overcome the dilemma in the process of Korean conglomerates' (Jaebols) restructuring in the economic crisis. That is, it will explain the myth of market-led restructuring, the limits of state-led corporate restructuring, and the emergence of market power in institutional arrangements both of weak market capabilities and of weak state capacities during the transitional period of democratic consolidation and market liberalization.