Deterring Extortive Corruption in Korea through Democratization and the Rule of Law

Extortive corruption is a particularly harmful form of graft, in which politicians threaten private property to induce bribe giving. While perceived rates of corruption in Korea sharply declined with democratization, instances of abuse of power remain, most recently at the National Intelligence Service. Employing previously classified data, this comparative analysis of industrial restructuring programmes demonstrates how democratization and a stronger rule of law created an inhospitable environment for extortive corruption. Whereas the dictator Chun Doo-hwan manipulated industrial rationalization measures to confiscate the assets of average financial performers that had withheld bribe contributions or were politically suspect, democratic checks on authority protected firms from President Kim Dae-jung's willingness to sacrifice property rights for the sake of corporate restructuring objectives. Potential victims of expropriation could appeal for support from competing veto players. An independent judiciary defended the rule of law and backed the bankruptcy court's authority to act as an independent arbiter for troubled firms, and a free press offered firms a means through which to gain support from an electorate interested in maintaining a system of private property rights. By reducing the credible threat of asset expropriation, Korean democratic institutions helped deter acts of extortive corruption.