Chapter 3

of

The Escape from Oppression and Poverty:

A Developmental History of Korea

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This chapter describes Korea’s transformation from being a poorly commercialized economy controlled by aristocrats into a market economy based on democracy. Broader and deeper than can be described as institutional changes, the development is better labelled as the transition from limited to open access order. As North, Wallis, and Weingast(2000: 18, 23) defined, limited access order refers to a state, where elites enjoy privileges in terms of “property rights and access to resources and activities”. Under an open access order, all citizens have “the right to form organizations that can engage in a variety of economic, political, and social activities”.

The transition did not refer to the rise of markets eclipsing the state, but to the rise of impersonal transactions and the growth of the public sector occurring in parallel. The mutual dependence of markets and state capacity is indicated by successful market economies being typically associated with government activism to support mass education, provide infrastructure, and organize social insurance (Lindert(2004); North, Wallis, and Weingast(2009)).

The illegalization of status order in 1894 marked the beginning of the Korean evolution from a limited to an open access order, which was carried forward by the introduction of the rule of law under Japanese rule and the post-colonial land redistribution. The development was completed by the establishment and consolidation of democracy in South Korea in the late 1980s, an achievement discussed separately in chapter 7.

This chapter has four sections, describing the primitive state of the public sector and markets in pre-colonial Korea, the growth of state capacity and the sphere of markets under Japanese rule, and the emergence of state intervention in South Korea, and, finally, comparing the institutional setting in the three regimes…..

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