Globalization and capital disembedding: the decline of the developmental state in South Korea

Abstract This study examines how globalization has engendered capital disembeddedness and consequently eroded the foundational features of developmental states. Focusing on South Korea, this study traces three key steps in this process. First, international organizations forced Korea to open its domestic markets, marking the beginning of capital disembedding. Second, financial globalization prompted the government to develop alternative financing sources for enterprises amid deregulation, effectively diminishing the state’s control over capital. Furthermore, global production networks provided enterprises opportunities for technological advancement and hands-on learning, reducing their reliance on government support. Taken together, globalization has empowered capital to evade state oversight and reshaped the government-business relationship. Paradoxically, the economic crisis and market failures triggered by globalization have compelled the Korean government to re-regulate its markets and revitalize the economy. However, its regulatory ability remains weaker than that of a classic developmental state, and state-business relations have not rebounded to their former heights.