The economic crisis of 2007-2009 and the slow recoveries, recessions and austerity policies that have followed in its wake have re-ignited interest in the topic of financialization: a term used as a shorthand for the increasing prominence of financial motives and financial actors in the economy, including stock markets, shareholders, institutional investors, financial instruments and macroeconomic policies that benefit financial capital (Epstein 2005; Lee et al. 2009). On one hand, a consensus has emerged that financialization is perhaps one of the most powerful processes shaping the global economic landscape: one that can be witnessed through the enormous expansion of financial assets and financial activity, the profitability of financial sector, the rising importance of financial profits for non-financial corporations and so on. On the other hand, there continues to lack a common understanding or clear conceptual definition about what constitutes the nature of financialization and what it says about contemporary power relations in capitalist society (Lapavitsas 2011; Van der Zwan 2014: 101). Definitions of financialization and interpretations of its sociopolitical implications are as diverse as political-economic schools, ranging from orthodox Marxists and the Monopoly Capital School to the Regulation School, Post-Keynesians, Science and Technology Studies and many other heterodox and synthetic approaches. This pluralism has stimulated a range of empirical studies of finance and its effects at a variety of different scales: from the everyday scale of the body up to the global. Nevertheless, as we discuss in this essay concerning debates surrounding financialization in South Korea, there remains a tendency in much of the literature to posit financialization in terms of the ascendency of the financial over the real economy (Epstein 2005; cf. Stockhammer 2008, 2010): a view that presumes a functional separation between finance and industry that can be problematic for the wider study of capitalist social relations, much less political strategies that seek to address power and inequality. Furthermore, such a view of financialization risks turning the process from an explanandum into an explanans--an external cause rather than something that itself needs to be explained--as happened with studies of globalization in the late 1990s and 2000s (Rosenberg 2002; Van der Zwan 2014).
Instead of presuming the autonomy of the financial sector over the rest of the economy, recent work by geographers and other critical social scientists has called for greater attention to the globally variegated and place-specific structural and political-economic dynamics of financial processes (Buckley & Hanieh, 2014; Peck & Theodore 2007; Seo 2013). This work has focused on how financial processes interact with existing institutional, urban and class relations involved in configuring capitalist accumulation in diverse contexts instead of embracing simplified, parsimonious models of financial hegemony. This article seeks to complement this wider effort and shares its sentiment that financialization should be regarded as an uneven geographical process. Furthermore, as we argue below, when approached from the perspective of places outside of the financial centres of the North Atlantic, the limitations of certain idealized understandings of financialization--particularly those premised on the functional separation of financial from industrial capital--to describe economic processes, such as those we discuss in the context of South Korea, become clear. While, certainly, many of the abovementioned phenomena associated with financialization are observed--such as increases in asset prices and an increasing proliferation of derivatives and other financial instruments (Kang 2013)--it becomes much more difficult to posit a straightforward ascendancy of 'financial economy' over 'real economy' in the form posited by many Keynesian theories of a 'rentier' class that is structurally distinct from 'productive' capital.
Specifically, the focus of this article is how financialization has been both experienced and debated in South Korea where it has become a hotly contested topic. The 1997 'Asian' financial crisis and its after-effects on the Korean economy stimulated much of this debate in particular (Pirie 2015). Intellectuals have debated financialization in South Korea from perspectives that are cognate to debates elsewhere, with institutional political economy, post-Keynesian and Marxist economics providing some of the dominant narratives, as we discuss below. As the political stakes involved in understanding the role of finance in the Korean economy are high, the conflict between these perspectives has been intense. However, in our opinion, some of the understandings of financialization advanced in this debate have been deeply problematic in that they obstruct or neglect important capitalist power relations that shape economic inequality and political power by underestimating the power of Korea's large family-led conglomerates known as the chaebol--which include such globally recognized firms as Hyundai, Samsung and SK, among others. Therefore, in what follows, we review the main approaches to financialization that have dominated intellectual discussion of neoliberal globalization in South Korea and assess the relative strengths and merits of each. We then suggest an alternate formulation of the process that better accounts for the power of the chaebol by adopting Nitzan and Bichler's capital-as-power approach. To this end, this article makes an empirical study of the transformation of Korean capitalism over the last 30 years in order to show how financialization in South Korea has been tightly coupled with neoliberal globalization. Here, we seek to show how Nitzen and Bichler's concept of capitalization provides a useful tool for understanding the transformation of Korea's dominant capitalist groups and their integration into global capital in a manner that contradicts the dichotomous, trade-off relation between 'financial capital' and 'industrial capital that underlies much of the literature on financialization (Neufield 2012). Their perspective on 'capital as power', we argue, can thus help expand and complement Korean debates on financialization and, by extension, potentially aid political strategies oriented towards confronting the inequality and social polarization that have accompanied economic restructuring in South Korea.
Debating financialization in South Korea
The Asian financial crisis of 1997-1998 wreaked havoc on South Koreas political economy, panicked its entire population and continues to be understood by many as the worst social disaster since the Korean War. As a consequence of the crisis, hundreds of thousands of businesses, including many of Korea's large, family-led conglomerates, the chaebol, went bankrupt; virtually all banks were bailed out; and about 1 million workers lost their jobs. What is worse, the Korean government was forced to accept the International Monetary Fund's (IMF) restructuring programmes as a precondition for the latter's financial bailout package and the Washington Consensus of liberalization, deregulation, privatization and flexible labour, originally set to be gradually rolled out, accelerated into a radical agenda to transform the foundations of the Korean economy. The severity of the crisis and the depth of the social change created in its wake thus ignited heated debates among left-liberal intellectuals, politicians and social movements.
Despite intense differences over the causes of the Asian financial crisis, left-liberal intellectuals quickly reached a consensus that a qualitatively different society emerged in the wake of the 1997 crisis. The post-1997 structural change was characterized as the transition of the Korean political economy from a 'high-economic growth model with high investment' to a 'low-economic growth model with low investment' (Ryu & Ahn 2010). This shift coincided with the intensification of social inequality: not only the gap between rich and poor but also that between organized and unorganized labour widened and has continued to widen ever since. As a consequence, these economic dynamics have led Korean intellectuals to continue to debate the exact nature of this transition and its relationship with the 1997 crisis, about which they remain divided. The main views on the subject can be grouped into three competing camps divided between mainstream liberal economics (Keynesian-neoclassical synthesis), post-Keynesian/institutional political economy and Marxist approaches.
The liberal camp finds the causes of the 1997 crisis, the subsequent slowdown of the Korean economy and the intensification of social inequality in the cronyism and anachronistic management of the Korean chaebol groups (Chung 1999; Jang 1998, 2001; Kim 2001, 2004; Kim et al. 2007). This camp has thus campaigned to toughen regulations on these groups' business activities and to reform their governance structure by strengthening (minority) shareholder rights and eliminating the elaborate cross-shareholding arrangements used by chaebol families to maintain managerial control over their affiliates. This campaign aimed to introduce a system of checks and balances into the boardrooms of the Korean chaebol and thereby create a level playing field between large and small firms. Furthermore, the liberal camp believes that these proposals can be implemented by instituting free-market practices--fair competition and the rule of law--that they think characterize the Anglo-Saxon economic model (Kim 2012: 195-217). For this reason, members of this camp are called advocates of 'shareholder capitalism'.
By contrast, the post-Keynesian and institutionalist camp regard foreign financial capital as the origin of the problems that have afflicted the Korean economy since 1997 (Chang 1998, 2004, 2007; Cho...