The Asian financial crisis of 1997–1998 was supposed to be the death knell for the developmental state. The International Monetary Fund supplied emergency funds for shattered economies but demanded that states liberalize financial markets and withdraw from direct involvement in the economy. Financial liberalization was meant to spell the end of strategic industry policy and the state-directed "policy lending" it involved. Yet, largely unremarked by analysts, South Korea has since seen a striking revival of financial activism. Policy lending by state-owned development banks has returned the state to the core of the financial system. Korean development banks now account for one quarter of all loans and take the lead in providing low-cost finance to local manufacturing firms in strategic industries.Elizabeth Thurbon argues that an ideational analysis can help explain this renewed financial activism. She demonstrates the presence of a "developmental mindset" on the part of political leaders and policy elites in Korea. This mindset involves shared ways of thinking about the purpose of finance and its relationship to the productive economy. The developmental mindset has a long history in Korea but is subject to the vicissitudes of political and economic circumstances. Thurbon traces the structural, institutional, political, and ideational factors that have strengthened and at times weakened the developmental consensus, culminating in the revival of financial activism in Korea. In doing so, Thurbon offers a novel defense of the developmental state idea and a new framework for investigating the emergence and evolution of developmental states. She also canvasses the implications of the Korean experience for wider debates concerning the future of financial activism in an era of financialization, energy insecurity, and climate change.
1. Rebirth of the Developmental State
2. Developmental States: Bringing Ideas Back In
3. Makings of a Developmental Mindset and Emergence of Strategy Mark I
4. Rise of Financial Activism
5. Fracturing Consensus and the Abandonment of Financial Activism
6. Return of the State
7. Emergence of Strategy Mark II
8. Return of Development Bankers
9. Full Flowering of Financial Activism
10. What Future for Financial Activism in Korea and Beyond?
"Thurbon’s new book is a welcome revitalization of the important discussion on the developmental state and improves our understanding of a distinct and path-dependent model of state-led capitalism that is emerging in East Asia. Her focus on the developmental mindset of the political elite is an important contribution to this understanding while at the same time raising many new questions for future debates... [I] strongly recommend this book for all scholars and students of development as well as those curious about Asian capitalism and its spirit."
Thomas Kalinowski, Ewha Womans University, Seoul, South Korea
Pacific Affairs Book Reviews
"Developmental Mindset offers a refreshing take on the developmental state model in Asia, and specifically in Korea. Elizabeth Thurbon identifies an important empirical reality: that financial activism and state-controlled banking for the purposes of industrial development are at the center of Korea's contemporary political economy. Developmental Mindset is the most convincing book I have come across in recent years about the role of the state in Korea’s—and East Asia’s—political economy of growth, industrial development, and economic adjustment."
Joseph Wong, Ralph and Roz Halbert Professor of Innovation and Professor and Canada Research Chair of Political Science, Munk School of Global Affairs, University of Toronto
"Elizabeth Thurbon provides a novel and valuable analytic framework and perspective for the study of the developmental state, and her arguments are clear and convincing. She demonstrates that financial activism has revived in South Korea since the 1997 crisis, leading us to reconsider the broad theme of states versus markets in the current environment of deepening globalization. Developmental Mindset provides a rich historical account of the origin of developmental ideas in Korea and is also based on extensive field research, including in-depth interviews with a number of key Korean officials."
Hyoung-kyu Chey, National Graduate Institute for Policy Studies, author of International Harmonization of Financial Regulation? The Politics of Global Diffusion of the Basel Capital Accord
"If you think that liberalization equals neoliberalism, or that the state is on the retreat, or that financial dominance or deindustrialization are inevitable, think again. In this important new book Elizabeth Thurbon explains how Korean state elites have reanimated the developmental state and the mindset that underpins it and pursued new forms of financial activism in support of industrial competitiveness. This book will become a classic in the tradition of developmental state literature and provides an important guide as to what can be achieved through judicious state activism."
Stephen Bell, School of Political Science and International Studies, University of Queensland