South Korea's economic development has generated a large body of scholarly literature. The focus has been on the country's transformation from an impoverished, aid-dependent state in the 1950s to a prosperous industrial and technological powerhouse in the early twentieth-first century, a story that is usually told with liberal use of the words “miracle,” “remarkable,” and “unprecedented.” Much less attention has been given to South Korea's more recent political economy, and even less to its financial liberalization and how that has impacted not only economic growth but also democratization and social equality. Therefore, this serious study based on careful examination of economic data has something new and important to add. More so since it reaches some important conclusions about the country's financial reforms—that they have not contributed much to economic growth, have led to economic instability, and have worsened income inequality.

Yung Chul Park, Joon-Kyung Kim, and Hail Park begin with an overview of financial development in South Korea since the early 1980s. Subsequent chapters focus on financial institutions and the impact of financial liberalization on markets, households, firms, the industrial sector, and income distribution. Later chapters discuss the financial regulatory system and the 2008 liquidity crisis. A final chapter examines the impact of the COVID-19 pandemic on the economy.

Here it should be noted that the financial and corporate reforms in South Korea carried out in the wake of the 1997 Asian economic crisis, generally known by Koreans as the “IMF reforms,” are generally regarded as a break in the country's economic history, marking the partial dismantling of the developmental state and a new era of a more neoliberal economy. However, Park, Kim, and Park trace the process of financial liberalization to shortly after Chun Doo Hwan came to power in 1980. The problem is that it can be a bit confusing when they lump the modest liberalization of the 1980s and early 1990s together with the big changes that took place in 1997. The authors state that it was not until the 1997 financial crisis that Seoul, under pressure from the IMF, undertook major financial and corporate restructuring; earlier financial reform efforts were “halfhearted” (p. 274).

The most important part of this study is what happened after 1997. The structural reforms of the late 1990s that took place under President Kim Dae Jung were a departure from the developmental state model in several respects. They opened up the financial industries’ markets to foreign banks, insurance companies, and investment firms. They lifted state control over interest rates, adopted a free-floating exchange rate, overhauled governance of financial institutions, and created an independent and unified financial regulatory agency. But the reforms, as the authors convincingly argue, did not have the intended desirable effects that state officials and both domestic and foreign economists expected. The near financial collapse in Seoul brought about by an economic crisis in Thailand shockingly revealed that for all its achievements, the Korean economy was extremely vulnerable to international upheavals. The reforms did not fix this, as demonstrated by the events of 2008. The won, for example, fluctuated unpredictably—much more so than the currencies of most developed economies. Nor did the reforms result in a return to high growth rates: from 1998 to 2017, the growth rate generally stayed in the respectable but modest range of 3 to 4 percent. Furthermore, rather than creating a fairer distribution of wealth, the reverse happened (pp. 157–58).

The authors give a number of reasons. The reforms did not go far enough. Except for the insurance industry, the financial markets never really opened up much, and five big domestic banks still dominate the banking sector. The collusive arrangement between the government, the banks, and the chaebols (the large conglomerates) was never completely dismantled. In fact, as every South Korean knows, the power of the major chaebols, such as Lotte, LG, Samsung, and Hyundai, and the families that control them has not been effectively curtailed. One limitation of their analysis is that the authors avoid getting into the politics of South Korea, where so much of the explanation of why the financial reforms had only a modest impact can be found. They also attribute the failure in part to the country's low birth rate and aging population. While they could be correct about this, it is not clear from their study how these demographic shifts are impacting the economy.

The three authors of the Financial Liberalism and Economic Development in Korea provide a study of failure and are somewhat pessimistic about the country's economic future. In a narrow sense of freeing itself from financial bubbles and shocks, South Korea's economic development in recent years has not been very successful, while in other ways, the country has fared quite well. It has avoided the “middle-income trap.” It has managed to survive changes in the global economy, in particular the rise of competition from China. Its growth rate has been respectable for a country at its income level; it recently surpassed Japan on a per capita income basis. There are achievements that Park, Kim, and Park do not consider. As political economists You-il Lee and Richard Lee have pointed out, South Korea has been extremely successful in improving its “national brand.” It has remained competitive and innovative in the tech sector and has developed new areas of economic growth such as the entertainment and the advance weapons industry. It is not necessary, however, to share the authors’ pessimism to appreciate what they have done—provided solidly supported data and analysis on an important area of South Korea's economic development.