Park Chung Hee Era

by Byung-kook Kim

  In 1979, Park was no longer in control of the situation. Rather than playing with the minds of his military praetorian guards, he let his follower—Ch’a Chi-ch’ôl—play with his mind. Instead of maintaining a balance of power, he inadvertently destroyed it by demoralizing one of its two poles—Kim Chae-gyu. Most critically, rather than taking precautionary actions against Kim Chae-gyu as he did with so many of his military praetorian guards, he let that troubled man stay on in his too-important post for too long, trusting too much the friendship and loyalty forged over a lifetime of comradeship. The balancing act did not work in 1979, but that is not the real surprise. What is more impressive is that Park controlled the necessary checks and balances so successfully for so long.

  c h a p t e r

  s e v e n

  The Leviathan:

  Economic Bureaucracy under Park

  Byung-Kook Kim

  Under park chung hee, South Korea approximated the ideal-type

  “developmental state.” The concept is Chalmers Johnson’s, used with respect to Japan, and was from the 1980s on applied to South Korea by a diverse array of political economists and sociologists, including Peter Evans.1 The ideal-type developmental state, Evans posits, possesses “corporate coherence” that endows its apparatuses with “a certain kind of autonomy” with which to transcend the interests of social forces in the formulation of goals and strategies and is “embedded in a concrete set of social ties” that link the state apparatuses to society. The state, having developed extensive institutional channels connecting it to the private sector, is posited as being able to reach down into the economy to assist and encourage economic growth in myriad ways. In other words, rather than replacing the private firm as a producer of goods and services, the developmental state continually negotiates and renegotiates goals and policies with the chaebol and others and backs the expansion of private entrepreneurial ventures with the goal of industrial growth. The ideal-type developmental state retains its autonomy, despite the complex interweavings of its connections with society.

  Chapter 7 shares Evans’s view that corporate coherence and embeddedness are key to the making of a developmental state, but unlike Evans, Chapter 7 emphasizes the primacy of politics in the South Korean context.

  Only with a political perspective zeroing in on Park’s political calculations

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  and roles can one explain many of the historical and theoretical puzzles surrounding the sudden rise of a developmental state during Park’s rule and its complex character, from the patrimonial but rationalized state bureaucracy to the hierarchical but segmented power structures to the hy-bridization of predatory and developmental state roles. The corporate coherence of the South Korean developmental state was more a product of the “visible hand” of Park, who was imbued with a politically electrifying vision of transforming South Korea into a “second Japan” in his lifetime and equipped with a keen strategic mind to dexterously balance the political requirements of coalition building and the forces of the market, than a product of an institutional artifact developed autonomously, incrementally, and technocratically from within the state bureaucracy. Likewise, the South Korean developmental state was institutionally bound to society, but its embeddedness was more asymmetric and political, with Park making deals with chaebol groups in the corridors of the Blue House. Those deals framed the overall direction of bureaucratic action.

  The primacy of politics is shown by the extremely ambitious goals for which the state was mobilized during Park’s political rule. Certainly, he sought policy feedback from the chaebol and the state bureaucracy through multiple channels of communication, but only as advice on how to achieve what were his goals, and not others’. Park, setting his sights on goals that far exceeded what most at the time thought the country’s small economy was capable of achieving, insistently held to his conception of Korea’s becoming a “second Japan” in one generation. His vision included big business manufacturing a full line of industrial goods and exporting quality products under national brand names through their own trading houses. In a sense, Park faced a chronic capital shortage more because of his overly ambitious goals than because of South Korea’s grim economic reality. His were anything but technocratically formulated goals. On the contrary, these dreams, as many saw them, drove Park into pursuing industrial projects that were too big for the domestic economy, but too small by international standards. When the chaebol resisted, the state bureaucracy wavered, and MNCs ignored, Park typically countered with even more ambitious investment proposals rather than scale down his original plan. Always aiming for the global market, Park frequently revised the production target upward until potential investors were tempted by the possibilities of growth that he offered. Even then, it was not foreigners but South Korean manufacturers who seized the risky but irresistible opportunity to transform themselves into industrial groups with their own international brand, technological capacity, domestic supply network, and overseas distribution facility, more or less on a par with Japanese multina-

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  tionals. To his bureaucrats, grappling with formidable tasks, Park reiterated his emphasis on a “can do” spirit. However unreachable the goal looked, he argued passionately, it was achievable if one set one’s mind to it. Park even suggested that rather than agonizing over what the goal and its instruments should be, state bureaucrats should plunge into the work and adjust policy as problems arose.

  Reflecting his ambitions for his country, the strategy of development Park chose had to be one of high risk, high payoff, and high cost. To lure the chaebol to take part in his risky plans, Park explicitly or implicitly promised to rescue them if they faltered, and struggled mightily to make this pledge credible. The type of exchange Park engaged in with the chaebol was, then, political in nature, pledging his regime’s support for the chaebol in return for their risk taking. Unable to specify a priori what level and what kind of political support would “match” an investor’s risk taking, Park ended up giving a de facto blank check to the chaebol in his assurance that he would support their industrial projects with additional state resources if the investment foundered. As such, the politics of rent-seeking constituted an essential part of his development strategy. It was only through bank subsidies, state guarantees on loan payments, tax privileges, monopoly licenses, and tariff protections that Park could make his industrial projects attractive to the chaebol. Thus in the modernization of South Korea, development and rent-seeking were different sides of the same coin. The market was viewed only as an instrument of his political goals, a device of the dirigiste state to speed up modernization through telescoping the stages of economic development.

  The problem with that strategy was that there would never be enough resources to achieve Park’s goal. The most aggressive risk takers among the chaebol, by rushing into strategic sectors, did grow into global players with their own brands and technology, but they also became burdened with huge loans, which meant that their liquidity was severely squeezed during recessions. The state banks suffered, too, as business distress exponentially increased the number of nonperforming loans. Consequently, the developmental strategy came to acquire the character of stop-and-go policies. Once the emergency relief measures for the ailing companies had been implemented, Park immediately engineered another expansionary business cycle through inflationary financing and foreign loans, as if he had not learned any lesson from the painful adjustment. But he was not ignorant of the risks and dangers; rather, he thought that the goal of becoming a second Japan in his lifetime did not permit the luxury of market-led industrialization. The outcome was an economic system addicted to hypergrowth. The state banks, taxed with massive nonperforming loans, and

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  the chaebol, suffering from a high debt-equity ratio, required double-digit macroeconomic growth to avoid a sharp deterioration on the balance sheet. The situation was sus
tainable only when markets continued to grow rapidly, thus driving the South Korean economy into a cycle of boom and bust and Park into stop-and-go policies.

  The high risk, high payoff, and high-cost strategy of cyclically moving between hypergrowth and emergency adjustment measures required Park to secure concerted actions from the state. To lure big business into risky industrial projects during a growth phase and to assist their restructuring during the subsequent adjustment phase, Park had the Economic Planning Board (EPB) secure the budget and underwrite foreign commercial loans; the Ministry of Finance (MoF) follow suit with tax cuts, tariff protection, and bank subsidies; the Ministry of Commerce and Industry (MCI) provide investors with a monopoly of production during the infant-industry stage; and the Ministry of Construction (MoC) lower land costs, maximize spill-over effects, and facilitate the logistics of interfirm collaboration by locating related industries in a cluster in directly or indirectly subsidized special industrial zones. Even the Ministry of Labor (MoL) joined in to give an unambiguous signal on where Park’s policy priorities lay, legally barring workers from organizing labor unions in newly designated strategic industries, while cooperating closely with the Ministry of Home Affairs (MHA) and the police to put workplaces under tight surveillance and weed out dissident chaeya activists from company unions.

  To succeed in bringing about the state’s concerted action, but without damaging his interest in building a cohesive ruling political coalition, Park adopted four principles vis-à-vis the state bureaucracy. First, Park insulated the economic bureaucracy from partisan politics, including factional rivalries within his ruling Democratic Republican Party (DRP), as well as from labor movements so that the economic bureaucracy could mobilize resources and balance the conflicting claims on industrial policy as he saw fit. Second, in order to develop the economic bureaucracy into a source of

  “neutral competence,”2 Park professionalized the civil service by endow-ing it with a set of meritocratic rules on recruitment, promotion, and job security. Third, he also made the economic bureaucracy a patrimonial organization loyal only to him and constantly bending to his wishes. To accomplish this he chose the EPB and the MoF as coordinators and entrusted the two to serve as the hands of his “alter ego” (punsin) to control and mobilize the economic bureaucracy.3 Fourth, however, Park tried to secure room for political coalition building at the same time and segmented economic ministries into the core, the strategic sectoral, and the auxiliary groups with varying institutional privileges and vulnerabilities. With these

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  principles, the economic bureaucracy came to aggressively pursue goals handed down by Park rather than following its own internally generated rules and principles of investment policy. The South Korean economic bureaucracy came to possess what Max Weber called “purposive” rather than “procedural” rationality, wielding extensive discretionary powers to fine-tune the conflicting requirements of encouraging risk taking and minimizing moral hazards, but this purposive rationality was more a product of Park’s political intervention than an outcome of bureaucratically generated neutral competence.

  A Professionalized but Patrimonial State

  Ironically, it was Park’s electoral victory in 1963 that permitted the transition to a professional but patrimonial state. Far from creating tight political constraints on state ministries, the 1963 elections made the South Korean bureaucratic apparatus externally more insulated and internally more centralized, flexible, and coherent, because with the elections, many of the junta leaders moved from the seats of power—the Korea Central Intelligence Agency (KCIA), the Supreme Council of National Reconstruction, and the cabinet—to the DRP, which was too organizationally shallow and ideologically weak to dominate the processes of agenda formation and policy formulation. Nominated as DRP candidates for the National Assembly elections, they had authority but not power.4 The resulting power vacuum was filled by civilian bureaucrats who depended solely on Park’s patronage for promotion. The political parties and societal forces rarely took on an oversight role. The monitoring of bureaucratic performance was carried out by Park’s presidential Secretariat and his lead economic agency, not the National Assembly. With a social structure too underdeveloped to construct a cohesive mass party system, and Park too dexterous in playing off rivals against one another, electoral democracy became an administrative or guided democracy long before Park declared the authoritarian yushin constitution in 1972 (see Chapter 8).5

  To make the politically insulated state bureaucracy also a professionalized institution, Park began recruiting large number of Grade 3B—

  the grade at which the higher civil service began—bureaucrats through a highly competitive examination system ( haengjônggosi, or haengsi). These haengsi bureaucrats symbolized the ideal of meritocracy and embodied

  “neutral competence,” passing an extremely tough exam with an average entry barrier of 1:52 during the 1963–1979 period. Given South Korea’s hierarchically structured educational system with a few elite universities

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  hoarding the country’s best minds, the civil service examination ensured Park a cohesive bureaucratic corps, with its members sharing close school and generational ties. This overlap in age and education helped foster a group identity among haengsi bureaucrats, which imbued the state bureaucracy with an esprit de corps.

  Moreover, with an eye to nurturing professionalism, Park provided secure tenure once a college graduate entered the civil service. By Park’s last years of rule, almost all Grade 2 and 3A vacancies went to internally promoted bureaucrats in sharp contrast to the period of Syngman Rhee (1948–1960) and Chang Myôn’s (1960–1961) rule, when over half of Grade 2 bureau directors were t¤kch’ae, or “specially appointed” non-career personnel.6 Grade 3B showed a similar change, with Park reducing its t¤kch’ae share by two thirds and increasing its haengsi share fivefold.

  The strengthening of job security made a career bureaucrat view the ministry where he began his bureaucratic career as his “native home” (ch’in-jông), an object of loyalty and affection. Typically, he would stay in his home ministry most of his public life, ending up identifying its institutional goals and missions as his own, internalizing its distinctive culture, absorbing its specialized policy knowledge and experience, and rising and falling with its political fortunes and misfortunes. By nurturing common values and sharing a common fate, the bureaus and divisions of any given ministry came to acquire organizational unity.

  Park’s relationship with state bureaucrats, however, was not based on his blind faith in their loyalty. Park was aware of the danger that an externally insulated professional bureaucracy could become its own master, putting its institutional interests ahead of national goals. The danger of policy drift and deadlock could also be high as state ministries jealously guarded their turf against any attempt at coordination. Consequently, Park checked daily on bureaucratic implementation of his orders and directives through on-site inspections, keeping state ministries on a short leash. In a similar spirit, Park also strove to quantify target goals and guidelines as much as possible. Having quantified his goals, he could at the same time delegate power and keep a close eye on the bureaucrats’ exercise of that power. When issues of paramount importance arose, or when interministerial conflicts resulted in a prolonged deadlock in spite of his lead agency’s attempt at coordination, Park established an interministerial task force inside his Secretariat in the presidential palace, with a personal aide—usually a career bureaucrat transferred from one or another ministry—in charge of coordination as its secretary general.7

  Fortunately for South Korea, however, Park also knew that there was an inherent limit to how much he could control through personal interven-

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  tion. He could not simply lash out against the state bureaucracy’s protection of its interests at the expense of the public interest, because he could not imple
ment his plans if the line ministries were hostile to the plans’ goal and spirit. Moreover, Park knew that he had the power to fight bureaucratic resistance with a long “stick,” but he also understood that a too frequent use of sticks was likely to defeat his purposes by demoralizing the line ministries and seriously weakening their organizational capacity. If a state bureaucracy was driven into apathy, Park would be left without the instruments he needed to penetrate society and reshape its preferences.

  Thus he needed a strong state bureaucracy to be a strong president.

  What he had to wield was two carrots and one stick to become not only a feared but also a beloved patron. Park organized the economic bureaucracy hierarchically into a pyramidal shape, with the goal of systematically pursuing the two-carrots-and-one-stick strategy of management. At the top of the pyramid stood the EPB as a superministry, with the MoF, whose policy preferences were intrinsically contractionary, and the MCI, whose policy preferences were intrinsically expansionary, assisting the EPB as its lieutenants. The elite EPB and MoF made up the bureaucratic core, with the mission to set agendas and policies of the other lesser but still strategic sectoral ministries, including the MCI, along the overall hierarchy of national priorities the EPB and MoF established under Park’s leadership. Because it was these lesser sectoral ministries that were in direct contact with organized societal groups and therefore at risk of being captured by them, Park’s treatment of the lesser sectoral ministries as second-class ministries explicitly or implicitly assumed the preemption of a spontaneous development of autonomous interest groups that could challenge the established priorities. By contrast, for the two core ministries, Park offered diverse privileges, including organizational growth, greater job security, and promotion opportunities in order to inculcate both with a sense of mission, an organizational interest in industrial transformation, and an unswerving loyalty to himself. In particular, the two core ministries frequently penetrated lesser sectoral ministries by controlling the staffing of their ministerial and even their bureau director posts in order to line up these lower ministries behind Park’s goals. The capture of lesser sectoral ministries by the EPB and the MoF was possible because Park willed it, which in turn was possible because political parties and interest groups were too weak to resist Park.