The State and The Effective Control of Foreign Capital: The Case of South Korea

The literature on the political economy of developing nations has focused attention upon the weakness and vulnerability of the nation-state and its limited ability to deal with and effectively alter the dominant forces of the international economy. Despite common international structures, however, the empirical pattern of foreign ownership and control of the means of production varies in newly industrializing nations. Domestic political structures and alternative state strategies may therefore have a significant impact on the pattern of foreign ownership and on the degree of control that foreign capital may exert on a developing economy. The author examines the principal legal and bureaucratic mechanisms utilized by the South Korean state to regulate the domestic economy's interaction with international capital, as well as the impact of these mechanisms upon domestic production patterns. The South Korean case demonstrates that, through the formulation and implementation of appropriate policy, the state in a developing nation possesses the capacity to shape the pattern of interaction with international economic forces. Legal and bureaucratic mechanisms have facilitated an industrial development that is predominantly owned and effectively controlled by Korean nationals.