South Korea has achieved remarkable economic success over the past five decades, but few cohesive models that explain its success comprehensively have been suggested. Korea's success was often understood as a copy or imitation of the Japanese development model and was often juxtaposed with the historical experiences of Taiwan, Hong Kong, and Singapore. Hwy-chang Moon's The Strategy for Korean's Economic Success and Elizabeth Thurbon's Developmental Mindset challenge such a tendency and try to capture a Korean model of economic development, based on Korea's unique institutional, political, and structural conditions. Both books make invaluable contributions to the field of Korean studies in general, and developmental studies in particular.
Moon raises a simple but critical question on Korea's economic development: “What are the real fundamental factors behind Korea's success?” (Moon, p. 241). He answers this question by highlighting four factors—agility, benchmarking, convergence, and dedication—dubbed as an “ABCD model.” Moon breaks down these four factors into two subfactors each: “Agility must be based on speed and precision. Benchmarking must be pursued through learning the best practice. Convergence is created from mixing the right resources to maximize synergies. And lastly, dedication requires diligence with a clear goal-oriented mindset” (Moon, p. 93). He argues that Korea and Korean firms can achieve economic success by creatively designing constructive strategies based on these eight factors. This ABCD model looks simple, but it provides an accessible framework to grasp the key institutional features in the Korean economic development process.
But, can the model be replicated in other settings? Moon claims that the ABCD model can be used to enhance competitiveness in other economies or firms. For this purpose, he further articulates the model: “the first four subfactors—speed, learning, mixing, and diligence—constitute the ‘basic’ factors for enhancing competitiveness in the early developing stages, and the other four subfactors—precision, best practice, synergy creation, and goal orientation—are the ‘advanced’ factors for developed stages” (Moon, p. 232). Depending on the developmental stages, he posits, each economy or firm needs to prioritize different factors for optimal constructive strategies. For example, the business strategies of Xiaomi as a follower of this model should be different from those of Sony, Nokia, or Apple. Likewise, developing economies should utilize different combinations of these factors.
Another main argument is that these factors are not mutually exclusive. For example, the Korean firms do not have to give up their strengths in speed over precision. Korean firms should maximize positive effects of the “pali-pali” culture that focuses on speed while improving precision. He also suggests that Korean firms should not undervalue imitation and learning versus innovation. In his view, Korean firms' and society's learning capability is a valuable asset in generating synergies by mixing the best practices of related fields in the global economy. In this context, he highlights that internationalization is also a critical factor for sustained economic success. The ABCD model captures some essential features we should note in understanding Korea's economic development.
Nonetheless, the sweeping and efficient generalization in the ABCD model leaves some room for further consideration and debate. The model fails to address the agency of the economic actors fully. Moon underscores that Korea had effective political leadership and bureaucracy, both committed to the goals of economic development. In his case studies on the business success of three Korean firms—POSCO, Samsung Electronics, and Hyundai Auto Company—he emphasizes the significant role played by the leaders—Park Tae-jun, Lee Byung-chul, and Chung Ju-yung, respectively—and their leadership. It is unclear how the ABCD model has evolved over time and what determined the internal dynamics of the evolution partly because the book focuses on the pattern and the relevant factors of development without considering the interaction between the actors and their surrounding environment. This weakness makes the ABCD model not easily applicable in a different institutional setting despite Moon's ambition otherwise. He briefly mentions Confucian ethics when he discusses effective political leadership and bureaucracy, but does not fully articulate how different institutional settings may have an impact on the formation of varying development strategies.
In this context, Thurbon's book is illuminating. It highlights the role of agency, especially focusing on the role of a president in shaping the development trajectory and the shared understandings and passions among the policymaking elite. Thurbon traces the historical origins of Korean developmentalism in general, and the government's initiative in allocating financial resources through various public financial institutions and policy measures, which she calls “financial activism.” Specifically, she highlights how the “developmental mindset”—“a set of shared ambitions on the part of the policy elite, as well as shared understandings about how best to realize those ambitions” (Thurbon, p. 4)—was shaped under the Park Chung Hee administration and continued in the following administrations. A novel aspect of Thurbon's approach to the evolution of Korean developmentalism in general, and the Korean developmental state in particular, is that her analytic focus is not on the changes of certain institutions or policies, but on the enduring “developmental mindset” shared among the policymaking elite. She criticizes an attributional approach to the developmental state idea that focuses on “a fixed set of common institutional arrangements such as an autonomous, meritocratic bureaucracy” (Thurbon, p. 5). Such an approach generalizes an empirical case on the weakening (or disappearing) of certain institutions or policies as the evidence of the dismantling or weakening relevance of a developmental state. Against this, she argues that we should explore how the “developmental mindset” has evolved over time to understand the wax and wane of the developmental state.
Thurbon explores a puzzling phenomenon in which the role of “state-owned policy banks” strengthened after the financial crisis in 1997–98, despite the Korean government's continued market-oriented reforms for financial liberalization. She explains this puzzle through what may be called a paradox of financial liberalization. With financial liberalization, commercial banks were squeezed for profits, making them look for more profitable and speculative lending sources, while avoiding risky loans. Bank loans have been channeled more into households and real estate, while non-chaebŏl firms suffer from the lack of available investment funding. Meanwhile, as a result of post-1998 financial reforms, chaebŏls have come to be “more risk averse and less willing to heed government calls to expand investment” (Thurbon, p. 149). These results, along with the rise of the Chinese economy, increased fears among the policymaking elite that Korea's industrial capacity and export competitiveness would decline. Coping with such fears, the policymaking elite has renewed the strategic state interventionism and “financial activism” formulated in the 1960s, which endured as a shared “developmental mindset” among the policymaking elite of key industry ministries, the Bank of Korea, and the Finance Ministry.
This paradox of financial liberalization captures the nonlinear evolution pattern of the Korean developmental state or developmentalism. As Thurbon argues, this view is in stark opposition to the declinists' view, which claims that the developmental state has been gradually dismantled as economic globalization and liberalization progress. Her argument is an insightful critique of the declinists' view that focuses on a fixed set of institutions or policies to interpret changes in them as the dismantling process of the developmental state. Existing studies on the relevance of the developmental state in an era of economic globalization have tended to conflate an empirical case with an ossified ideal type of the developmental state, which was often based on the Japanese developmental state model articulated by Chalmers Johnson in his MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975 (Stanford, Calif.: Stanford University Press, 1982), while sticking with analyses of a fixed set of institutions, especially on economic bureaucracy, or industrial policies. In this respect, Thurbon's critique is a significant contribution, not only to Korean studies, but also to the debates on the relevance of the developmental states model in an era of economic globalization.
Overall, both books offer a rigorous and convincing analysis of the key factors that contributed to Korean economic success and the causes of the “return of financial activism” in post-1997 Korea. They also succeed in locating the Korean case in a broader comparative context, identifying both unique and generalizable features of Korean experiences. They will be indispensable references for debates on Korea's economic development in the coming years, especially regarding the relevance of their interpretations in addressing the structural challenges that the Korean economy is currently facing, such as upgrading service industries, developing green energy, reforming chaebŏls, resolving mounting household debt, and tackling other economic issues with broader social implications.
