Korean Institutional Reform in Comparative Perspective
Korea is arguably the premier development success story of the last half century. Despite this success, there has been a nagging sense among many observers that the development of Korea’s economic and political institutions has not kept pace with the breakneck tempo of economic growth. During the decade since the 1997–98 fi nancial crisis, center-left governments have placed considerable emphasis on institutional reform. Accomplishments have included the establishment in 1998 of the Financial Supervisory Commission (recently renamed the Financial Services Commission) and the introduction of new regulatory practices, approaches, and standards; the passage of the Anti-Corruption Act in 2001 and the establishment of the Korea Independent Commission against Corruption in 2002; and the development of more robust civil society institutions such as the Council for the Korean Pact on Anti-Corruption and Transparency founded in 2005.
Now, 10 years after the crisis, coinciding with an electoral shift to the center-right, is an opportune time to take stock of the progress made during the past decade. The country’s institutional development has relevance beyond the specific case of Korea: the importance of institutions versus other factors is subject to considerable dispute in development economics literature, and whether Korea, the developmentexemplar, conforms to the “institutions rule” notion is of broader intellectual interest.
To address these questions, this paper exploits the growing body of quantitative data on institutional performance. Specifically, this project examines 52 institutional indicators covering 44 countries from four sources: Transparency International’s (TI) “Corruption Perceptions Index,” the World Bank’s Worldwide Governance Indicators (WGI) research project, the World Economic Forum’s (WEF) Global Competitiveness Report (GCR), and the Institute for Management Development’s (IMD) World Competitiveness Yearbook (WCY). Data on governance and corruption are derived from the fi rst three sources; all other time-series tranches are derived only from the World Competitiveness Yearbook. These sources allow us to analyze on a consistent international basis Korea’s relative performance over the past decade.
A preview of the conclusions: Improvements in Korea’s political and economic institutions during the past decade have outstripped the country’s “First World economy, Third World politics” image. Although the data are noisy, and Korea generally underperforms modestly relative to its level of per capita income, the country is not an outlier; and on most indicators Korea is converging on global norms. It would be hard to argue on the basis of this analysis that institutional development has led economic growth in Korea.