Liberalization and its discontents

“How do we create a world where economies are stable and can grow?” Martin Hart-Landsberg asked.

The question was rhetorical, and the quiet authority in his tone suggested that he’d long pondered the answer. “One thing that’s important to learn is that countries like Korea did prosper, and they transformed themselves economically, not through relying on the market, but through state planning,” Hart-Landsberg said.

The topic of conversation was the South Korean economy. As a professor of economics at Lewis and Clark College and an adjunct researcher at Gyeongsang National University’s Institute for Social Sciences in South Korea, Hart-Landsberg has spent years studying the subject.

This Thursday, he will deliver a lecture on his studies at Portland State, along with an analysis of the impact of efforts to turn that economy around through market liberalization.

Liberalization involves the opening of markets to foreign investors, generally by limiting a local government’s ability to regulate the flow of capital.

“The underlying idea of financial liberalization is that the free flow of capital leads to a more efficient allocation of financial resources and facilitates economic development,” reports a 2009 Asian Survey article titled “The Political Economy of Financial Liberalization in South Korea,” by Hyekyung Cho and Thomas Kalinowski.

The East Asian country shares in the financial woes distressing world markets today, but fiscal crisis is not new to the South Korean people.

In 1997, South Korea suffered a collapse of their lending sector after years of exponential growth, according to the Asian Survey article. That growth, manufactured by a sudden influx of foreign capital through liberalization, ultimately mired the national economy in debt. This, in turn, forced the government to borrow from the International Monetary Fund (IMF), which required greater liberalization measures as a condition of assistance.

“Conditions have really gotten worse, poverty rates have grown, inequality and economic insecurity have grown,” Hart-Landsberg said. “There is now general consensus that the neoliberal policies have been a failure.”

In his forthcoming lecture, Dr. Hart-Landsberg will be discussing those results, as well as Korea’s economic future. That future depends on the outcome of the ongoing struggle between a growing populist sentiment and pro-liberalization forces, including the Chaebol, which are family-run conglomerate businesses that have dominated the Korean business landscape since before the ’97 crisis.

The lecture is being presented by PSU’s Institute for Asian Studies, which is striving to showcase more events about matters concerning Asia and Korea in particular.

“We decided that a priority for the Institute would be to showcase Korean topics, as a way to begin to build the Korean Studies program,” said Katherine Morrow, the institute’s programs administrator. She explained that many Korean-Americans have expressed interest in PSU’s offerings of Korean culture. “This is a place where we can also fill that void.”

Morrow found out about Dr. Hart-Landsberg while pursuing leads about local scholars versed in Korean studies. She expressed interest in bringing him to Portland State to share his knowledge after she reviewed his works in the field.

“He’s done quite a bit, and has a deep knowledge of Korea and Korean economy,” she said. She acknowledged that his was a “particular viewpoint” of Korean economy, but stressed the importance of learning it. “It would be nice to know what that viewpoint is and to start a conversation about the Korean economy.”

That viewpoint, as Dr. Hart-Landsford contends, is that some dimension of state planning could be key to economic recovery, and that markets can be manipulated by privatized forces in a deregulated environment, leading to an increased disparity between the rich and the rest of the population.

“One of the lessons of the Korean experience is that state planning and control over the direction of economic affairs is very important, and can be very efficient,” he said. “Unraveling the state and trusting to market forces is not a recipe for improving the quality of life and stability of the economy.”

The debate will continue, but analyzing the realities of situations abroad, such as Korea’s, can heighten individuals’ overall economic awareness, whatever their viewpoint.