South Korea’s industrial giants, the chaebols, were indeed one of the major engines of economic growth as we have discussed in the previous chapters. Also illustrated is that the economic contribution of chaebols, however, was made only possible by the state’s intervention and support. In this chapter, we delve into the transformation of this so-called developmental state–business relationship from its formative years to post-crisis changes in an effort to explain how such a heretic system of market capitalism has functioned – with exceptional performance – during the miracle period, and why this system began to show schisms and finally has fallen prey to more full-on neoliberal global capitalism in the late 1990s. Further, we will review what has happened after the crisis and how, despite such a colossal shock, the South Korean government and chaebols have rebuilt the economy, maintaining a still cosy but economically efficient relationship. More specifically, we expound upon the overall changes of state– business relations from the combination of “commanding dependency” and “dependent manipulation” to that of “hollowed commanding” and “bargaining dependency” as a result of the success of “late industrialization”. The post-crisis transformation of the state– business relations under the growing influence of globalization and democratization will also be defined as “politicized coordination” and “cooperative politicking”.

IDENTIFYING THE STATE–BUSINESS NEXUS

Despite the potential for misconceptions, the Korean economy had never been a fully market-oriented one even following periods of economic liberalization in the 1980s and 1990s. For example, most of the daily necessities, including flour, charcoal briquettes (yeontan), noodles, bus and taxi fares, bath house fees and petrol/diesel prices were strictly controlled by government regulation. Now, in the era of neoliberal globalization, such explicit controls may not be available but the government is still implicitly controlling major items, which has a significant effect on price levels, including but not limited to transit fares, highway tolls, tuition of private educational institutions, telecommunication charges, realtor commission, credit card transaction fees, poultry prices and, amid the Covid-19 recession, delivery application commissions. These cases demonstrate that South Korea’s government has persistently interfered with the private sector but the ways in which it intervenes and its policy goals to achieve by the interventions have been dynamic over time.