Developmental Mindset: The Revival of Financial Activism in South Korea

How can we explain the striking revival of financial activism in Korea since the 1997 financial crisis, and especially since the 2008 global financial crisis? How has it come to pass the state-owned policy banks now account for over 25 percent of all loans in the Korean financial system, with favourably-termed finance routinely extended to local firms in strategic industries, often on a conditional (performance-linked) basis, as in earlier developmental days? This revival is particularly striking because it contradicts widely held assumptions about the (liberal) direction of financial reform in Korea over the past two decades. This paper advances an agent-centred understanding of developmental states to explain the recent resurgence of financial activism in Korea, and to account for developmental state evolution more broadly. Taking interpretive agents (read: developmentally-minded policymakers) as its analytical starting point, the paper examines the factors that have given rise to and sustained developmental ways of thinking about finance over time, and that have enabled these agents to translate their developmental ambitions into action, despite considerable local and international pressures for liberal reform.