The Discursive Demolition of the Asian Development Model
Author(s): Rodney Bruce Hall
Source: International Studies Quarterly, Vol. 47, No. 1 (Mar., 2003), pp. 71-99
Published by: Wiley on behalf of The International Studies Association
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International Studies Quarterly (2003) 47, 71-99
The Discursive Demolition of the Asian
Development Model
RODNEY BRUCE HALL
The University of Iowa
I demonstrate the constitutive effects of discursive strategies and
explore the discursive conditions in which changing ideas generate
these effects. I perform an extensive analysis of the discursive strategies
generated by three key actors in the Asian financial crisis. I argue that all
three, U.S. Treasury, the International Monetary Fund, and the Kim
Dae-jung South Korean administration, represented key practices
associated with the Asian model as "cronyism" and as "corruption,"
thereby normatively delegitimating these practices, thereby effecting the
demise of the Asian model of development in Korea. I argue that these
discursive practices generate narrative structures that have a constitutive
effect on the subsequent discursive and economic practices of actors.
The manner in which the narratives represent "causes" of the crisis
constitute and reconstitute the social meanings by which past and
current social and economic practices are legitimated or de-legitimated.
The structures constituted by these social meanings re-create and
reconstitute the present and future conditions for strategic action. I
conclude with a demonstration of how these narratives institutionalize
the discourses they construct through changes in Korean state and
commercial institutions.
The events attending the Asian Financial Crisis of 1997 have generated a
burgeoning literature debating the causes of the crisis, the appropriateness of the
IMF's response to the crisis, and the design of alternative international financial
architectures to avoid a repetition, and rightly so. When large segments of the
global economy disintegrate within a few weeks in regions previously sound and
stable, these events deserve attention from economists, policymakers, and scholars.
The crisis also challenges the viability of the Asian model of development,
characterized in part by strong government involvement in industrial development
and export promotion. Only a decade ago this model was touted as essential in
generating the "East Asian miracle" (Amsden, 1989; Wade, 1990; World Bank, 1991).
This article argues that the Asian development model has been discursively
delegitimated in the crisis by the discursive conditions in which changing ideas
about the viability of these practices generate their effects. Among the effects of
these discursive conditions was the delegitimation and abolition of key Asian model
practices and their abolition by IMF mandate and/or statute in South Korea and
Thailand, and to a lesser extent in Indonesia. This article will focus on Korea,
where subsequent economic restructuring has been most far-reaching.
I am grateful to Jonathon Acuff and Kenneth Moffett for research assistance. Thanks go to John A. C.
Conybeare, three anonymous referees, and the editors for useful criticisms of earlier drafts. Thanks to Raymond
Duvall, Friedrich Kratochwil, and Nicholas Onuf for useful theoretical discussions.
( 2003 International Studies Association.
Published by Blackwell Publishing, 350 Main Street, Maiden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK.
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The Discursive Demolition of the Asian Development Model
Various scholars have noted the central role of the United States in promoting
the processes of globalization. In describing the relationship between the neoliberal
project of globalization and what he calls the ideology of "globalism," Manfred B.
Steger has recently elaborated what he calls the "central tenets" of neoliberalism.
These include "the primacy of economic growth; the importance of free trade to
stimulate growth; the unrestricted free market; individual choice; the reduction of
government regulations; and the advocacy of an evolutionary model of social
development anchored in the Western experience and applicable to the entire
world" (Steger, 2002:9). Persistent pressure for liberalization of East Asian financial
institutions and practices and capital accounts in the years leading up to the crisis
had succeeded in providing an East Asian conduit for mobile capital seeking the
high returns that could be found there by the early 1990s. Consequently these
economies became highly vulnerable to the exchange rate fluctuations that beset
them in 1997. The Clinton Treasury under Robert Rubin and Lawrence Summers,
respectively, had exhibited a marked tendency to "micromanage" the IMF (The
Economist, 2002:71). This close management of the IMF is one of the mechanisms
by which the globalization is advanced, by forcing further liberalization on countries
that are experiencing short-term banking and financial crises through IMF
conditionality and discursive practices that delegitimate more heterodox economic
practices (see, e.g., Hay, 1999).
While power and interests are important in explaining social outcomes, they
"have the effects they do by virtue of the ideas that make them up ... the issue of
'how' ideas matter is not limited to their causal effects" (Wendt, 1999:114). The
notion that ideas have causal effects is not a uniquely constructivist position.
Neoliberal institutionalists support this contention with their own work (Goldstein
and Keohane, 1993). But constructivists argue that ideas play a stronger role in
constituting power and interests than do material forces. In the pages to follow I
support the constructivist contention that ideas also have constitutive effects (Adler,
1997; Wendt, 1999:114). Some of these constitutive effects are generated by the
discursive construction of subjects, objects, and social and power relations between
them (Doty, 1993; Weldes and Saco, 1996). Precisely because discourse "is a social
practice through which thoughts and beliefs are themselves constituted" (Weldes
and Saco, 1996:371), discursive construction and constitution of subjects/objects,
agent/structure, and relations between these is a form of social construction.
Adler (1997, 2002) and Wendt (1998, 1999) have demonstrated that nearly all
constructivists agree that ideas and the discourses that transmit them have
constitutive effects (in the sense that ideas and discourses constitute agents and
objects), even while they may not agree entirely on how ideas and discourse
generate these effects. As Nicholas Onuf has observed in a recent volume dedicated
to these debates (Fierke and J0rgensen, 2001), there is a split among
"constructivists who think that language is indispensable to social construction...
[vs.]... postmodern scholars who think that there is nothing beyond language
as a social construction" (Onuf, 2001:246). To date this debate has, in my view,
generated more heat than light and I am not persuaded that a recounting of the
positions will add much to the current study.'
In this article I inquire into the discursive conditions that generated restructuring
of the Korean economy in the wake of the Asian Financial Crisis and elaborate
their constitutive effects. I argue that three key actors (U.S. Treasury, IMF, and
South Korean Government) engaged in discursive practices that generated
discursive structures which constituted the identities of the actors and their
interests (the "rules of the game" within the drama of regional financial crisis), and
i I benefited from discussions in this context with Raymond Duvall, Friedrich Kratochwil, Nicholas Onuf, and an
anonymous referee, each of whom have persuaded me that these debates are quite fractious without being as
illuminating as we might hope.
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RODNEY BRUCE HALL
allocated social meaning to (or "designated") key practices associated with the Asian
development model as "causes" of the crisis. The social meanings embedded within
these discursive structures designate the economic practices of various East Asian
actors as normatively good (ethical and/or economically competent) or bad
(unethical and/or economically incompetent) behavior. Economically competent
behavior in this discourse comports with the strictures of neoliberal economics and
the Washington consensus basket of policies, and economically incompetent
behavior in this discourse does not. Those practices discursively designated as
unethical and/or incompetent are designated by the discourse as "causes" of the
crisis.
Thus I argue that what these three key actors represented as causes of the crisis
with their discursive practices are actually explanations, or narratives, that are
embedded within a constitutive framework of discursive practices. Their discursive
practices generate narrative structures that have a constitutive effect on the subsequent
discursive and economic practices of these actors. The manner in which the narratives
represent "causes" of the crisis constitute and reconstitute the social meanings by which past
and current social and economic practices are legitimated or delegitimated. The structures
constituted by these social meanings recreate and reconstitute the present and future conditions
for strategic action.
In this context, I argue that three key actors engaged in discursive practices that
represented key practices associated with the Asian development model as "crony
capitalism" and "corruption" thereby normatively delegitimating the Asian model
and normatively privileging market-based processes and outcomes. The Asian
development model had been based on high domestic household savings rates, and
a number of practices featuring public-private sector cooperation, such as high
corporate debt/equity ratios, bank-firm-state collaboration, national industrial
strategies, and investment incentives conditional on international competitiveness
(Wade and Veneroso, 1998). The discursive conditions of competition among ideas
regarding the viability of Asian model social and economic practices made it
impossible for South Korea to continue these practices. Key actors in the Asian
Financial crisis discursively redefined East Asian states and firms. Prior to the crisis
East Asian states and firms were exemplars of the "developmental state" that had
generated the "East Asian economic miracle" and had constituted the most
promising "emerging markets" in the 1990s.
According to the World Bank, the 23 countries of East Asia had the fastest growth
rates in the world between 1965 and 1990, led by the "seemingly miraculous"
growth of Hong Kong, Indonesia, Japan, Malaysia, the Republic of Korea,
Singapore, Taiwan, and Thailand (World Bank, 1993). East Asia had experienced
massive growth for three decades, pulling roughly 400 million people out of
poverty through hard work, the establishment of niche markets in the global
economy, and high rates of domestic savings that were reinvested in the domestic
economy. The South Korean economy grew at an average of 7 percent per year
between 1963 and 1997 (Krugman, 1999:24). Per capita GNP grew from a mere
$67 in 1953 to almost $8,500 in 1994 (Yoo and Moon, 1999:264). In the three
decades between 1960 and 1990 life expectancy in the region increased from 56
years to 71 years, and in the two decades immediately preceding the crisis the
number of people living in absolute poverty fell to 350 million from 720 million
with the rate of decline accelerating in the last decade, falling to 27 percent from
1885 to 1995 (Stiglitz, 1999:3). Yet during the crisis East Asian states and firms were
redefined as "corrupt" practitioners of "crony capitalism" who were suffering the
"inevitable" punishment of the hidden hand of the financial markets for their lack
of "transparency" and "good governance."
I present an analysis of the discursive practices of three key actors in the process:
the U.S. Treasury Department with Robert Rubin and Lawrence Summers
consecutively as Treasury Secretary, the International Monetary Fund (IMF) when
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The Discursive Demolition of the Asian Development Model
Michel Camdessus was Managing Director, and the South Korean government
after the transition from the administration of Kim Young-sam to that of Kim Daejung
who had been elected President in December 1997. While I read literally
hundreds of documents in researching this article, space limits the number I can
cite to support my arguments. I focus largely on the press releases, speeches, and
other public pronouncements by these actors that were released as events unfolded.
It is through these public pronouncements that actors created their public
discourses and sought to signal the messages of their narratives to other actors,
to one another, and to the international financial markets. It is through these very
public pronouncements that the discursive strategies deployed within them have
their constitutive effects.
Constitutive Effects of Discursive Practices and the Social Construction of
Identity
Discursive practices are "social acts enabled by a discourse, through which some
relevant aspect of the work is actively defined and constituted" (Weldes and Saco,
1996:374). They have both an intersubjective character and a performative
character and are deployed by state officials, and other actors, in respectively
interpreting and defining the world around them. Perception of social reality does
not come unmediated to the perceiver, but is always represented to the perceiver in
part through the discursive practices of other actors (371).
As Jutta Weldes and Diana Saco have observed, discourse is a "structure of
meaning-in-use" that is both an intersubjective and a linguistic construct (Weldes
and Saco, 1996:373). The intersubjective quality of discursive practices is evident in
the fact that meaning is socially constructed through shared language. They are linguistic
in the sense that language is a symbolic system from which representations of
subjects, objects, and relations between these are constructed (373). Language, in
this context, is a means of generating subjects, objects, and social worlds (Doty,
1993:302). Subjects are constituted and produced within specific discourses (305).
Social forms are produced "by many speakers in agreement" (Onuf, 1989:44). In
the empirical (discourse) analysis to follow we will see the replacement of older
social forms, such as "developmental states" and "East Asian miracles," with newer
social forms, such as "corrupt" practitioners of "crony capitalism," emerging in
narratives that emerged from the shared representations of at least three speakers
in agreement, namely, U.S. Treasury, IMF, and the Kim Dae-jung administration in
South Korea.
Various representations of social reality generated by distinct discursive practices
of different social actors compete with one another for dominance. Roxanne Lynn
Doty argues that we can determine that a "controlling" or "dominant" discourse
has emerged from these competing representations if "the same kinds of subjects,
objects and relations are found to exist in different texts" (Doty, 1993:306). A
successful demonstration of the constitutive effects of discursive practices in the
social construction of meaning will demonstrate how the discourses that become
dominant produce or reproduce the identities of actors (305).
It is in this sense that discourses are, according to Weldes and Saco, capabilities
that people use to construct meaning (1996:372-373). But non-discursive
capabilities are relevant as well, as Weldes and Saco demonstrate that asymmetry
in material capabilities among actors in the international system generates an
"asymmetric capacity to define or be defined" (372). This enables more capable
actors to discursively construct identities for less capable social actors. Weldes and
Saco illustrate this ably in their empirical case in which the United States defines
and redefines Cuba, with significant consequences for U.S. policy toward Cuba.
Similarly, Amy Skonieczny has recently illustrated how the forces advocating
NAFTA were able to discursively redefine Mexico from an unreliable third world
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RODNEY BRUCE HALL
TABLE 1. Narratives Invoked by Actors and Dominant Narratives
U.S. Kim Dae-jung Dominant
Narrative Treasury IMF Administration Narrative
Global Capital Mobility Regime x
Transparency x x x x
Good Governance vs. Crony Capitalism x x x x
Proximate (Immediate) Causes of Crisis x x
Root (Structural) Causes of Crisis x x x x
Further Liberalization Required x x x x
Retribution by Hidden Hand of the x x x x
Market
Language of Inevitability x x
Language of Naturalism / Neutrality x x
Washington Consensus x x x x
Specters of Apocalyptic Past or Future x x
Denial Syndrome x
Disorderly Liberalization x
Simultaneous Democratization and x x
Development
Language of Imperative x
Language of Progress x
Language of Mysticism x
Contra-Asian Values x x
country to an economic partn
debate from a dull issue of trad
consequence that NAFTA passe
North America (Skonieczny, 2
will illustrate how U.S. Tr
administration in the Repub
associated with the Asian deve
these practices and impellin
"structural reform" of economic institutions.
I now turn to the specific representations of actors and their actions, and
illustrate how these representations are discursively woven into narratives that
generate the discourses and their constitutive effects. Table 1 presents a summary
of the narratives invoked by each actor in the discursive analysis that follows.
Narratives invoked by all three actors are "dominant" or "controlling" narratives,
with the most far-reaching effects on the institutional restructuring of the Korean
economy which was implicated by discursive redefinition of the Korean developmental
state. I would ask the reader to pay special attention to the manner in which
these narrative representations of "causes" of the crisis reconstitute actor identities
and construct new social meanings of long-established Asian practices. These new
meanings then serve as a structural constraint on action, reconstituting the
conditions for strategic action.
Treasury Representations of Proximate and Ultimate Causes
The U.S. Treasury Department's representations of the sources of the Asian
Crisis evolved as the crisis unfolded, but remained remarkably true to early
representations. U.S. Treasury officials consistently drew upon the themes
established in the neoliberal discourse on "the Washington Consensus" (Naim,
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The Discursive Demolition of the Asian Development Model
2000) in favor of a global capital mobility regime in developing their representations
of causes of the crisis. This is illustrated in a speech by Robert Rubin in Seattle
in September 1997 as the crisis was unfolding. The capital mobility narrative is
packaged neatly in Rubin's assertion that a "broad-based agreement on strong
market fundamentals such as open markets, privitization, reduced deficits and the
rule of law" (Rubin, 1997) was the key to recovery in the region. Rubin also
introduced Treasury narratives on "transparency" as a corrective for the foibles of
"crony capitalism." He argued that the affected governments must "strengthen
disclosure requirements" and "achieve greater transparency in central bank
balance sheets" and "strengthen... domestic financial systems."
Then Deputy Treasury Secretary Lawrence Summers began to develop these
discursive themes before the Congress in November. He described Treasury's view
of the mix of policy errors and domestic structural institutional incapacities
common to affected Asian nations (Weiss, 1999). In future representations Treasury
would build upon these early representations and develop them into "root" causes
of the crisis.
Summers represented the proximate causes of the crisis in terms of an
"unsustainable mix of monetary and exchange rate policies" on the part of East
Asian governments and "large short-term foreign currency exposure ... backed by
unproductive assets" in the private sector, compounded by a "reluctance to reveal
the full extent of losses" (Summers, 1997). He represented the ultimate, or "root"
causes of the crisis as inadequacies of the domestic institutional structures of the
affected East Asian nations. In the public realm Summers referred to an "absence of
strong and credible domestic institutions" and "weak [financial sector] supervisory
regimes" while the private sector was plagued by "lax lending standards" and
"inadequate capitalization" among lending institutions. A U.S. Treasury led,
neoliberal narrative on the sins of "crony capitalism" emerged in Summers's
prescriptions for prevention of future crises and appropriate domestic policy
responses to the present crisis. Asian governments were enjoined to "develop
effective and transparent supervisory and regulatory institutions and strong
legal and financial structures." He called upon Asian governments to "develop
... checks on imprudent behavior" by ensuring "high levels of transparency and
disclosure."
Summers made it clear that Treasury regarded the crisis as a misfortune brought
on by Asian misdeeds. They were to absorb the pain of adjustment by "making the
macroeconomic policy adjustments needed" thereby restoring confidence in the
currency through the standard IMF prescription of orthodox stabilization
measures that included slashing government spending, hiking taxes, and raising
interest rates. "The primary burden of responsibility," he intoned, "must continue
to fall on the countries concerned."
The narrative representation of Asian misdeeds took a much stronger form in a
February 1998 speech. Summers represented the "systemic roots" of the Asian
Financial Crisis in terms of a discursive attack on the core features of the
developmental state (Woo-Cumings, 1999). The attack quickly developed into a
narrative on the evils of national industrial policies and crony capitalism. Summers
asserted this development model "favored centralized coordination of activity over
decentralized market incentives. Governments targeted particular industries,
promoted selected exports, and protected domestic industry ... [relied] ... on
debt rather than equity, relationship-driven finance not capital markets, and
informal rather than formal enforcement mechanisms" (1998a). Summers
represented the spectacular successes that Asia had experienced in the realm of
economic growth over the past 30 years as due entirely to "strong universal
fundamentals" vs. "practices uniquely Asian" that he maligned. This critique of the
core features of the Asian development model was repeated the following month
(Summers, 1998c). The litany of shorter-term problems that Treasury saw as
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RODNEY BRUCE HALL
leading to the crisis represented Asian governments as incompetent to formulate
coherent monetary policy, and profligate private sectors as bereft of fiduciary
responsibility and in need of structural reform.
Summers followed these representations with a four-point approach to
reforming the economies of the region, which he stipulated as macroeconomic,
financial sector, and corporate sector reforms as well as "reforms of the role of
government." The macroeconomic reforms were to entail "short term adjustments
to restore confidence and growth" and "long-term reforms to make the framework
for macroeconomic policy more transparent and accountable." Financial sector
reforms entail "closure of merger of insolvent financial institutions ... [and] ... a
new supervisory and regulatory infrastructure to foster modern credit evaluation
and risk management techniques," while corporate sector reforms entail the
creation of "bankruptcy regimes ... [and] ... improvements in accounting
standards and corporate disclosure ... [featuring] ... generally accepted accounting
principles [GAAP]."
Most of these representations attack the core features of the Asian development model.
Summers rounded out Treasury's four-point program by calling for "a fundamental
change in what government is expected to do ... reducing public
involvement in the private sector" and to make government "more transparent,
less open to corruption." Summers attacked core Asian development model
practices such as development of national industrial policies, coupled with
government-directed bank lending to strategic business concerns. Moreover, he
rhetorically equated these practices with crony capitalism and corruption in the same
paragraph. He quickly followed this discursive strategy with another that
represented the crisis as retribution by the invisible hand of the market for the sins of
crony capitalism and governmental interference in the economy.
Summers's representations of the proximate causes of the crisis have been
echoed by others, and have merit as causal mechanisms for triggering banking and
financial crises, though counter-narratives are also available in many instances.
These representations were so successful, relative to opposing counter-narratives,
that they became dominant, or controlling (Doty, 1993:308), and thus an
authoritative guide to policy formation in addressing the effects of the crisis. The
narratives they constitute reinforce the authority of the institutions that "carry the
meaning of the discourse" (e.g., Doty, 1993; Neumann, 2001; Skonieczny, 2001;
Weldes and Saco, 1996). They enable creation of new institutions, and the
reconstruction of others.
Treasury Representations of Proximate Causes
Summers's representation of the failure of Asian governments to align monetary
policy with exchange rate regimes is a clear reference to the decision of the Thai
government to maintain an "inflated" value of the baht by drawing down the
foreign exchange reserves to defend its value on international currency markets.
Then followed the fateful decision of the Thai government to let the baht float in
July 1997, triggering attacks on the baht, and consequently on the Korean won, the
Indonesian rupiah, the Malaysian ringgit, and other regional currencies (Krugman,
1999:85-101; Henderson, 1998).
In the capital mobility narrative governments allow the international currency
markets to determine the price of their currency. Governments maintain a high
value of their currency by exercising tight fiscal and monetary policy. Thus
Summers implicitly represents the Asian governments as either irresponsible or
incompetent to manage these policies. The reference to "unproductive investment"
refers to the construction of unneeded office towers in Bangkok with imported
funds. It entails a rebuke to Asian governments for subsidizing highly leveraged
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The Discursive Demolition of the Asian Development Model
Chaebols in Korea, for example, through government-directed lending by
"inadequately independent" domestic commercial banks.
Summers's reference to "substantially reduced competitiveness" was a discursive
attack on the legitimacy of core Asian development model practices. He successfully
deployed this discursive attack irrespective of the spectacular success of these
practices in pulling hundreds of millions of people out of poverty over three
decades, with nary a single year's downturn in GDP in many countries in the region
(Stiglitz, 2000).
This narrative has been quite successful due to the large debt-to-equity ratios, by
Western standards (World Bank, 1999a; Haggard, 2000:151), of Korean conglomerates
and their pre-crisis penchant for financing their operating expenses with
short-term foreign borrowings. But it has been successful even though the Chaebols
did not experience any acute debt-servicing difficulties until the international
currency markets bid the won down by about 80 percent over roughly three
months at the end of 1997, followed by IMF-imposed interest rate increases of
roughly 100 percent (Yoo and Moon, 1999:273). As former World Bank Chief
Economist Joseph Stiglitz argued, "even a well managed firm could easily go
bankrupt" under these conditions (Stiglitz, 1998b). Debt with short-term maturities
denominated in dollars, yen, and Deutschmarks suddenly had to be repaid
with won that were worth roughly half of the won's value when the debt was
acquired.
Counter-Representations of Proximate Causes
Counter-narratives regarding proximate causes of the crisis have been provided by
respected, neoclassically trained, mainstream economists, but often ex post facto.
Paul Krugman and Joseph Stiglitz have both countered Summers's representation
of Asian governments as either irresponsible or incompetent. Krugman pointed out
that while the Thai central bank finally let the baht float, these governments
reasonably expected the price to stabilize at about 15 percent below its previous
value at which point Thai goods would again be cost-competitive (Krugman,
1999:93). The subsequent 50 percent devaluation of the baht was not justified by
the fundamentals, but the observed contagion effect was because the Thai and
other East Asian economies had become vulnerable to "self-fulfilling panics" (98)
precisely because they had liberalized their financial markets (101) in response to
long-sustained Treasury and IMF liberalization and capital mobility narratives.
Joseph Stiglitz, as Chief Economist of the World Bank as the crisis unfolded,
provided an ongoing counter-narrative to the IMF's "cookie-cutter" package of
orthodox stabilization measures, all of which are highly deflationary. In an article in
The New Republic Stiglitz recounts how the IMF failed to respond to the counternarrative
constituted by his arguments.
....changing minds at the IMF was virtually impossible. When I talked to senior
officials at the IMF-explaining, for instance, how high interest rates might
increase bankruptcies making it even harder to restore confidence in East Asia
economies-they would at first resist. Then, after failing to come up with an
effective counterargument, they would retreat to another response: if I only
understood the pressure coming from the IMF board of executive directors-the
body, appointed by finance ministers form the advanced industrial countries, that
approves the IMF's loans. Their meaning was clear. The board's inclination was
to be even more severe; these people were actually a moderating influence.
(Stiglitz, 2000: 56-57)
The critical counter-narrative criticizing the IMF conditionality as inappropriate
was ineffective even while provided by such stalwart mainstream, neoclassical
economists as Martin Feldstein (1998), Paul Krugman, Jeffrey Sachs (Sachs, 1997;
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RODNEY BRUCE HALL
Radelet and Sachs, 1998), and Joseph Stiglitz, whose criticism ultimately cost him
his job as Chief Economist at the World Bank.2 Stiglitz's recounting of their reaction
to his variant of the counter-narrative above is telling. But in the same piece Stiglitz
tells us something he regards to be true and germane about the structure of
identities and interests of the IMF staff, even as he denigrates and attacks this selfascribed
identity in the harshest terms. According to Stiglitz:
But the older men who staff the fund-and they are overwhelmingly older menact
as if they are shouldering Rudyard Kipling's white man's burden. IMF experts
believe they are brighter, more educated, and less politically motivated than the
economists in other countries. In fact the economic leaders from those countries
are pretty good-in many cases brighter or better educated than the IMF staff,
which frequently consists of third-rank students from first-rate universities.
(2000:57)
Stiglitz's description of his highly critical view of the social self-identification of the
IMF staff is as instructive as it is scathing. In this account the IMF staff see
themselves as enlightened technocrats bringing the IMF's considerable resources
and neoclassical economics to bear on a developing world darkened by cleavage to
benighted practices and flight from the light provided by the strictures of
neoliberalism. This structure of identities impels them to press their remedies on
the recalcitrant Asians irrespective of opposition that they consequently dismissed
as mere politics. The counter-narratives were ineffective either because they
surfaced subsequent to the IMF program implementations or because the role
played by IMF, buttressed by the support of the G-8 Treasuries, obviated Asian
protestations as politically inspired.
Treasury Representations of Ultimate Causes
Treasury Narratives on Liberalization and Capital Mobility
Summers discursively targeted the national industrial policies employed by East
Asian nations over several decades for two reasons. First, because they "favored
central coordination of activity over decentralized market incentives," they were
anathema to neoliberal discourse. Second, because "governments targeted
particular industries, promoted selected exports, and protected domestic industry"
these practices were inimical to Western business interests. Eradicating these
practices had long been central to the U.S. bilateral trade agenda with these nations.
In an address in May 1998, Summers admitted that "the IMF and sister World
Bank programs, not just in Asia but worldwide, have achieved more liberalization
than our bilateral or multilateral negotiation have ever achieved" (1998d).
The significance of this admission should not be underestimated. John Mathews
has argued that three agendas were in play when Korea signed agreements with the
IMF on 5 December and 24 December 1997. First was the conventional IMF
agenda to restore confidence in the Korean currency and economy through
standard package of reduced public sector spending, higher taxes, and tight
credit. The second agenda was "a conspicuous American agenda to open up
Korean economy to foreign investment ... contained in the 'restructuring a
reform measures' clauses of the IMF agreement ... not normally the subject of
agreements ... [they provide] ... substantial opening of the Korean market t
investors as a quid pro quo for the bailout" (Mathews, 1998:752, emphasis ad
Finally, the incoming Kim Dae-jung government employed this conditionality
break the power of the Chaebols as a step toward economic democratization.
2 New York Times, 2 December 1999, C1.
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The Discursive Demolition of the Asian Development Model
The structures of identities that underpin the structures of interests pursued by
these agendas follow. U.S. Treasury viewed itself as more than a parochial agent of
bilateral U.S. foreign policy agendas in Asia. Treasury acted in the role of a
"progressive" champion of global financial and trade liberalization. IMF acted in its
role of the enlightened technocracy prescribing the needed bitter medicine
required to restore wayward East Asian nations to the global financial fold. Kim
Dae-jung acted as the great reformer of the South Korean society, economy, and
state. In this guise he ran for office.
The structure of identities and interests of all three actors had been constituted by
long-standing neoliberal globalization capital mobility and liberalization narratives
well prior to the onset of the crisis. Kim's role as domestic reformer was by no
means a simple instrumental adoption of these discursive practices. The crisis and
attendant IMF conditionality simply helped Kim pursue the policies indicated by
the interests previously discursively generated by his reformist identity that had
antedated the crisis. This was completely consistent with these long-standing
neoliberal narratives, which had clearly arisen exogenously to Korean society.
The significance of the remainder of Treasury's representation of the "root
causes" of the crisis can now be better evaluated. Summers complained about "a
reliance on debt rather than equity, relationship driven finance not capital markets,
and informal rather than formal enforcement mechanisms" (1998c). He argued
that the "problems ... are much more microeconomic than macroeconomic, and
involve the private sector more and the public sector less." The accounting and
disclosure requirements imposed by the IMF were explicitly designed to make it
difficult to engage in directed lending to highly leveraged conglomerates that
engage in opaque accounting techniques involving cross-divisional payment
guarantee systems for raising loans (Mathews, 1999:755).
A counter-narrative severely criticized the IMF for allowing itself to be politicized
in imposing conditionality on East Asian nations far exceeding what was actually
required to restore confidence in the region's currencies and economies (Feldstein,
1998; Stiglitz, 2000; Sachs, 1997; Radelet and Sachs, 1998; Stiglitz, 1998b; Wade
and Veneroso, 1998). A recent report by a group of economists from the U.S.,
Europe, Asia, and South America charges that "the IMF staff's decision-making is
driven by national agendas, specifically those of the principal share holders" (De
Gregorio et al., 1999). Conversely, Summers effectively evoked the languages of
universality and inevitability in asserting that the response of the IMF should reflect
the "broad consensus in favor of economics based on markets ... [and that] ... the
end goal, of laying the foundations for market led growth, is no longer in question"
(1998c). These counter-narratives were unsuccessful as well because Treasury was
able to seize the moral high ground in asserting that the conditionality imposed by
the IMF programs simply amounted to healthy liberalizing measures whose
introduction in Asian economies was long overdue.
Treasury Narratives on "Crony Capitalism" and "Good Governance"
The opprobrium of "corruption" and "crony capitalism" was invoked by Summers
as he developed a narrative on "good governance," which may be read as code for
Treasury's view of the opposite of corruption and cronyism. He discursively
claimed the moral high ground while advocating conditionality that so severely
micromanaged the day-to-day dealings of East Asian economies that the IMF
program for Indonesia ended up, according to Martin Feldstein, "specifying in
minute detail such things as the price of gasoline and the manner of selling
plywood" (Feldstein, 1998:24). Summers discursively placed an ethical gloss on the
intensely intrusive IMF conditionality in asserting that "greater transparency and
accountability of public institutions, the elimination of cartels, subsidies, trade
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RODNEY BRUCE HALL
restriction and other distortions ... will have a direct effect on the scope for
cronyism and corrupt practices."
The success of the "good governance" narrative is remarkable given the
proliferating moves of international financial institutions to impose such conditionality
irrespective of its overt subversion of long-standing norms of sovereignty. One
ineffectual counter-narrative argued that it is easier for nondemocratic states to
implement IMF-imposed austerity measures than for democratic countries to do so.
Post-crisis measures taken by Kim Dae-jung's government to repress labor have
reversed protections that Korean unions had previously won through the political
process. Elimination of these protections was mandated by the IMF as a condition
for receiving the IMF bailout in 1997! (Thomas, 2000:554-557). Kim has clearly
been quite willing to crack down on strikes deemed "illegal" since taking office.3
Treasury applied the neoliberal narrative on transparency throughout Asia. In
Tokyo in February 1999 Summers lectured the Japanese on the need to take drastic
measures to make the Japanese economy grow faster to provide demand for
distressed South East Asian goods. Summers averred that the U.S. enjoyed superior
economic performance because of the transparency of U.S. corporate practices
subjecting them to market discipline which prevented firms from hiding difficulties
with their balance sheets (1999).4 Implied in this narrative is the language of the
"naturalism" and "neutralism" of the market, the systematic representation of market
processes as natural, neutral, inevitable. In this narrative, the natural, neutral
market, deus ex machina "disciplines" the profligate, and the corrupt.
In testimony before Congress in May 1998 Robert Rubin employed the narrative
that was to frame Treasury's discursive strategy for putting pressure on a
recalcitrant Indonesia, and blaming the Indonesian government for Indonesia's
continuing economic and social difficulties. This narrative begins by praising Korea
and Thailand and holding them up as examples to be emulated, while chiding the
Indonesians for dragging their feet on implementing "reforms" that are, according
to the narrative, a precondition to economic recovery (Rubin, 1998d).
The Indonesian government's "mishandling of the crisis...led to a loss of
confidence in the government by the Indonesian people and the global financial
markets ... [and] ... exacerbated the current economic problems and led to
political instability." Even as many observers were arguing that the IMF conditions
for fiscal outlays and monetary policy were too harsh, turning a temporary problem
of liquidity into widespread insolvency, and turning local short-term recessions into
a multi-year regional depression, Rubin was quick to blame the continuing
economic agony on the slow response of the Indonesians to do what the IMF had
required. The IMF program was "a creative response to the coming crisis, not the
cause.
Rubin had previously been very anxious to ensure those of his liste
concerned about the misery of the common people of Asia (World Bank, 19
Levinsohn, Barry, and Friedman, 1999; Paitoonpoing, 1999; Mukherjee, 1999
the aftermath of the crisis that neither open capital markets nor the IMF pro
was to blame. In September 1997 Rubin had argued that "turbulence" [sic] s
not cause Asian states to invoke capital controls or reverse capital acc
liberalization that was in fact a precondition to their financial vulnerability
"should lead all of us to recommit to the sound policies that create confide
(1997). In January 1998 he claimed that the IMF programs "are not aust
3 See, for example, Office of the President, Republic of Korea (OPRK), 1998c; The Economist, 8 July 20
and Far Eastern Economic Review, 7 December 2000, 16.
4 The assertion is more than a little embarrassing in light of the wave of accounting scandals that plagu
corporations in the summer of 2002, resulting in a spectacular plunge in Wall Street equities valuatio
reminiscent of the behavior of international capital markets during the Asian crisis.
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The Discursive Demolition of the Asian Development Model
programs"; that it was the "crisis and the ensuing loss of confidence-not the
reform programs ... [that] ... leads to economic hardship" (1998a).
Neither were the IMF programs a bailout of U.S. banks that had made foolish
loans to the region, in this representation. Rubin attempted in the early months of
the aftermath of the crisis to sidestep the moral hazard issue. In testimony before
Congress Rubin admitted, "it's true that as a byproduct of the programs ... some
creditors will be protected from the full consequences of their actions" (1998b). But
this consequence would have to be tolerated because "any action to force investors
and creditors involuntarily to take losses ... could cause banks to pull back from
other emerging markets, which could cause serious global economic disruptions"
(1998b, 1998d).
These themes were picked up and amplified by Treasury Assistant Secretary
Timothy Geithner in testimony before Congress in late February. Geithner told the
Joint Economic Committee, "it is the crisis-not the programs-that induces the
stress" (1998). There was no alternative to immediate implementation of the IMF
programs for countries wishing to recover. "Countries that have ... delayed
adjustment and [tried] less comprehensive reforms have ... simply lengthened the
crisis and delayed recovery."
Subsequent to Rubin's departure from the government for a position with
Citibank, where he was shortly to be joined by one of his former Japanese
counterparts,5 Summers, redeployed this narrative in a speech in Jakarta in a visit
designed to pressure the post-Suharto Indonesian government into complying with
the IMF program. Summers argued that among the "core lessons" to be learned
about post-crisis economic recovery in Asia was that "governments that are able to
respond effectively to these problems will be rewarded that much more rapidly"
(Summers, 2000).
In this narrative the Indonesians had not slashed their government spending
quickly enough and had not jacked up interest rates high enough to halt the slide of
the rupiah. While they had removed Suharto, they had not dismantled the system
of crony monopolies left over from the Suharto era. Neither Habibe nor Wahid had
moved quickly enough to satisfy the markets. Indonesian democracy remained too
deficient to inspire confidence in the economy.
In Jakarta in January Summers expressed Treasury's exasperation with the footdragging
on the part of the Indonesian Bank Restructuring Agency (IBRA) to
liquidate insolvent firms and financial institutions and the assets that had backed
failed loans. At the time Summers spoke in Jakarta, western capital was in an
exceptional position to acquire formerly Indonesian assets at obscenely low prices
in real terms. The rupiah had fallen to a low of just over 15 percent of its January
1996 value against the U.S. dollar by early January 1998, and had only recovered to
roughly 30 percent of this pre-crisis value by January 2000.6 Summers displayed
some rare sensitivity to Asian sensibilities by recognizing that their "fear of fire sales
is understandable," but followed it immediately with a harsh message in the
neoliberal language of inevitability, arguing that "if you hold firm against low prices
today you will face even lower prices tomorrow."
A former Australian ambassador to Indonesia was questioned whether IMF and
the Western Treasuries and Finance Ministries directing IMF policy were justified
in coupling the economic fix for Indonesia to these "governance" issues. In
response he argues that "I think the answer is no. But at a certain point, that message
had probably been pushed to the point where it became so lodged in market perceptions that it
became, psychologically, a necessary condition for a restoration of confidence" (Dalrymple,
5 Rich Miller and Robert McNatt, "Mr. Yen Joins Mr. Dollar at Citi," Business Week, 6 December 1999, Issue 3658,
p. 6.
6 International Monetary Fund, 2000 (see Figure 2.2, Selected Emerging Market Economies: Bilateral U.S.
Dollar Exchange Rates, p. 55).
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RODNEY BRUCE HALL
1998:236). It is difficult to argue that U.S. Treasury's emphasis on these
"governance" issues in its policy pronouncements and the parroting of these
representations in IMF policy pronouncements had no role in generating negative
perceptions among market actors.
Treasury Narratives That Invoke the Specter of the Apocalyptic Past and Future
Throughout the crisis and its aftermath, U.S. Treasury officials and others engaged
in narratives in which a bleak and desolate portrait is painted of the benighted days
before the dominance of neoliberalism. The implicit message is that a departure
from those policy prescriptions indicated by the lore of neoliberalism will return us
to the depths of the Great Depression and ensuing global war. The specter of the
apocalyptic past is invoked to frighten the listener away from questioning the
discourse of the current political economy. Another narrative line employs the
specter of an apocalyptic future to explain why the investor side of the moral hazard
issue cannot be addressed without similarly dire consequences.
Rubin invoked this narrative frequently to counter criticism that the IMF was
bailing out international investors who had made bad bets, while the people of East
Asia suffered the consequences. In September 1998 he argued that forcing
investors to take losses "could cause banks to pull their money out of the country
involved" (1998a). Rubin warned that forced losses for international investors
"could cause banks to pull back from other emerging markets, which could cause
serious global economic disruptions" (1998b; 1998c). Even more dramatic was the
portrait painted by Summers in February. Without the IMF "there would be no
conditioned reform ... no international recognized source of apolitical [sic!] advice
... further devaluations and ... [lower capacity for Asian nations] ... to purchase
our goods ... more pressure for the U.S. to act unilaterally with taxpayer
resources" (Summers, 1998d; Geithner, 1998). Summers evoked the specter of
both the Great Depression and the depression of the late nineteenth century as the
consequences of a world in which "international financial problems do not meet
with a cooperative response" (1998b). This was a world "when ... competitive
devaluations ... deflation, contracting and widespread depression laid the ground
for what was as great a conflict as human history has seen." Without the IMF "we
would be dealing with a great deal worse: possible debt moratoria in a number of
countries" (1998a).
IMF Representations of Proximate and Ultimate Causes
The International Monetary Fund's representations of proximate and ultimate
causes of the Asian Financial Crisis are strikingly similar to those of U.S. Treasury.
Significantly, the Treasury narratives on "liberalization" and on "crony capitalism"
versus "good governance" appear in some of the earliest pronouncements of the
former Managing Director of the IMF, even as the crisis was unfolding. In October
1997 Michel Camdessus emphasized IMF's view, strikingly consistent with that of
U.S. Treasury, that the crisis broke in Thailand due to underlying structural
weaknesses in the economy and the Thai government's failure to devalue the baht
sooner (1997a). These criticisms later evolved into an IMF representation of East
Asian "denial syndrome" (Camdessus, 1997c, 1997d, 1999b; Fischer, 1998) of the
Thai government, in the face of "clear warnings," as the crisis approached. This
rhetoric is consistent with the manner in which we represent the self-delusion of the
alcoholic, the drug addict, or the problem gambler, people who continue to feed
their addictions irrespective of evidence that is clear to all others but themselves
that this behavior has rendered their lives dysfunctional.
Despite evidence (much of it provided by the IMF's own analysis) that East Asian
nations suffered the observed vulnerabilities precisely because they liberalized their
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The Discursive Demolition of the Asian Development Model
capital accounts too rapidly, Camdessus argued that the lesson "is not about the
risks of globalization but ... sound macroeconomic fundamentals that give markets
confidence and do not invite reckless market behavior ... transparent and marketfriendly
policies" (1997a, emphasis added). The discursive strategy here engages
several narratives when we consider the binary oppositions that the listener is
invited to consider in this single, well-crafted sentence. Consider the binary
opposites of the terms I have highlighted from Camdessus's speech. "Irresponsible"
/ "responsible," "Reckless" / "prudent," "transparent" / "opaque," "marketfriendly
policies" / "government interference in markets." In this representation,
East Asian nations had been punished by "the markets" because their behavior had
been "irresponsible," "imprudent," "reckless," and "heedless."
The U.S. Treasury narrative on a global capital mobility regime is also present in
Camdessus's representations of what the IMF was doing to help. Camdessus spoke
of the need for liberalization measures to be executed in an "orderly" fashion, an
allusion to Fund criticism that Asian nations had liberalized controls on short-term
foreign bank loans but not loans with longer maturities, giving Asian firms an
incentive to borrow abroad at short maturities at lower interest rates than those
offered on longer-term loans by domestic banks (Berg, 1999). He spoke of the
"agreement [between whom?] that the IMF Articles should be amended to mak
the liberalization of capital movements one of the purposes of the Fund and t
extend the Fund's jurisdiction to capital movements" (Camdessus, 1997a). F
discursive representations of East Asian practices present in the Treasury narratives
failed to appear in the IMF narratives. This is particularly true of those narrativ
that represent key practices of the Asian model of development as "cron
capitalism" and thus as corruption, thereby discursively delegitimating an Asi
counter-representation that these practices reflected "Asian values."
IMF Representations of Proximate Causes
While traveling in the region in mid-November 1997 as the crisis was deepening
Camdessus paused in Singapore to give a briefing to the press in which he outlin
the IMF's early representations of the proximate causes of the crisis. He focused
Thailand where the crisis had begun when the Thai central bank had allowed t
baht to float when its reserves were exhausted in July. Camdessus told t
international press in Singapore:
Certainly, the Thai crisis did not strike out of the clear blue sky. ...
Macroeconomic indicators pointed to substantial imbalances: substantial real
exchange rate appreciation; a marked slowdown in export growth; a persistently
large current account deficit financed increasingly by portfolio inflows, including
a substantial amount of short-term capital; and rising external debt. These
problems, in turn, exposed other weaknesses in the Thai economy, including
substantial, unhedged foreign currency-denominated borrowing by the private
sector, an inflated domestic property market, and a weak and over-exposed
banking system. (1997b)
In retrospect, Camdessus's stipulation of these deteriorating technical indicato
are undoubtedly true, and while we cannot easily confirm them, we have no reas
to doubt IMF assertions that IMF warned the Thai government of these indicato
and recommended a graduated realignment of the exchange rate of the ba
against major currencies. The Thai bubble economy had indeed continued
balloon throughout early 1997 with foreign lending thrown into an overheati
Thai economy. But what is not mentioned, though it is acknowledged explicitly
later IMF representations, is that "the markets" (i.e., international curren
speculators) overshot the devaluation of the baht and consequently generated
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RODNEY BRUCE HALL
"self-fulfilling crisis, in which capital withdrawals by creditors cascade into a
financial panic" (Radelet and Sachs, 1998:2).
Note Camdessus's assertion that these weakening technical macroeconomic
indicators "exposed" deeper structural problems in the Thai economy. These
problems ostensibly justified the horrendous attack on the value of the baht in
international currency markets, and the contagion effect. Financial contagion
resulted from realization that Thailand's trade competitors in the region would be
disadvantaged in competition with Thai exports rendered substantially cheaper by
the radical depreciation of the baht. This "market logic" stimulated quite successful
attacks on the Korean won, the Indonesian rupiah, and the Malaysian ringgit, and
less successful attacks on the Philippine peso and Hong Kong dollar. But the IMF
represented the results of these attacks as market "exposure" of underlying
structural weaknesses in East Asian economies. In the IMF narrative, these nations
are to blame for calling to themselves negative attention. The problems in Thailand
"prompted markets to take a closer look at the risks in other countries." But this
begs the question of why international investors had been pouring capital into these
economies for several years without evident concern about the risks.
Camdessus's representation of pre-crisis Asian nations as heedless drunks-indenial
was extended by Kunio Saito, IMF Director for Asia and the Pacific, in Korea
in late January 1998. Saito blithely told his Korean audience that prior to the crisis
"east Asian economies were like a drunk driver. There were yellow traffic signals,
warning of possible danger ahead, but east Asian economies, like a drunk driver,
paid no attention to the yellow lights and drove straight into the danger" (1998).
East Asian nations were "intoxicated by their own success." Governments failed to
take action to address clearly "overheating" economies and "corporate excesses."
Saito invoked the neoliberal narrative on the inevitability of retribution by the
hidden hand of the market when he complained that "structural reforms were
delayed" by Asian governments. "These problems and the authorities' inaction, including
in the area of systemic reform resulted in a loss of confidence in the financial markets"
(emphasis original).
Saito seems to have hoped the IMF would receive credit for actions actually taken
by the U.S. Treasury. He notes that toward the end of December 1997
"considerable efforts were made to roll over external short term debts," a move
"initially" resisted by "nervous" foreign creditors. This refers quite vaguely to the
fact that Robert Rubin had called a meeting on 24 December attended by officers of
six U.S. banks with a combined exposure of roughly $100 billion in East Asia, to
twist their arms to roll over debts. Apparently no notes were taken at this meeting,
to the frustration of members of the U.S. Congress seeking to subpoena such notes
and investigate the creditor side of the moral hazard issue implied by the bailout
(Chapman, 1998:5). But moral hazard is a problem only among "corrupt" Asians in
the Treasury narratives, which the IMF narrative largely mirrors.
IMF Representations of Ultimate Causes
In an early IMF representation of the sources of the crisis, Camdessus mirrors two
critical U.S. Treasury narratives on the "root" causes of the crisis, namely, the
narratives on "transparency" and "good governance."
I see two other factors that hastened the stampede: one, the lack of transparency, and
hence the increased uncertainty, about government and central bank operations,
about the true state of financial sectors, about the links between banks, industry, and
government and the impact these links might have on economic policy; and two,
the controls-and threat of controls-on market activity. Given the tendency of
financial markets participants to run with the herd, this was a sure-fire way to send the herd
scrambling for safer pastures and set back efforts to restore confidence. (1997d,
emphasis added)
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The Discursive Demolition of the Asian Development Model
While it may appear refreshing to see Camdessus acknowledge a "stampede" and
the "herd" behavior of international capital markets, his rhetoric represents this
behavior as justified. In this representation, international investors seem suddenly
to realize they do not know what is on the balance sheets of the firms and financial
institutions in which they have taken substantial positions. It is the lack of
transparency in accounting practices, the penchant for cronyism, the imprudent
government-directed lending to fiscally unsound firms, and the tendency for
political parties to be in bed with financial concerns that impelled investors to
withdraw their capital from the region. It is through joint discursive representation of the
core practices of the Asian model of development by U.S. Treasury and the IMFas corruption,
among other negative representations, that generated the normative policy environment in
which it became impossible for Asian nations to resist IMF-mandated "reforms" of these
practices. These discursive representations had tangible institutional effects,
including massive revision of the Thai, and especially the Korean domestic
commercial legal codes (Sutham, 1998; Senn, 1998; J. Kim, 2000; H.-J. Kim. 2000).
In Kuala Lampur in December, Camdessus dismissed the charges of the
Malaysian prime minister, Mahatir bin Mohammed, that hedge funds were to
blame. The Asians were not to complain that their currencies could come under
savage attack by mostly Western firms specializing in the arbitrage techniques that
demolished so many Asian currencies. In Camdessus's representation "it would be
a mistake to blame hedge funds or other market participants ... turbulence [sic] in
the market is only a symptom of more serious underlying problems" (1997d) in
Asian economies. Mahatir was not persuaded, and imposed capital controls in the
fall of 1998 to stem the flow of capital from Malaysia. The controls, which were later
lifted, had mixed results (Haggard, 2000:73-85). But Malaysia did recover from the
crisis more quickly than all other Asian nations aside from Korea.
In an address in Paris in January 1998 Camdessus demonstrated that the evolution
of IMF policy to include "transparency" and "good governance" conditionality
constituted "norm governed change" in the international system (Ruggie, 1982;
Koslowski and Kratochwil, 1994). Camdessus admitted that "as recently as a few
years ago, there was little support among our members for the IMF... to become
more actively involved in governance issues," but today "government reform has
moved to the top of the policy agenda" (1998a). He proceeded, however
unintentionally, to make the case that the triumph of neoliberal ideology had
changed the terms of discourse. What had changed, he intimated, is "the perception
of what constitutes sound economic policy."
Camdessus represented these perceptions as a result of the negative consequences
of bad governance on national economic performance. He claimed that
"a broader consensus [later characterized as 'universal'] has emerged on the central
importance of transparency and good governance in achieving economic success"
(1998a). This assertion begs the question of the true breadth of this consensus given
that the G-8 countries control nearly half (48.6 percent) of the votes in the
institution, with the United States alone controlling over 17 percent (International
Monetary Fund, 2001).
Camdessus ignored the fact that Western investors poured money into the region
throughout the 1990s irrespective of their prior understandings of the lack of
adherence to GAAP of Asian firms and of the tight relationships between Asian
governments, banks, political parties and firms, government-directed lending, high
corporate debt-to-equity ratios, and national industrial policies oriented toward
establishing global niche markets in specific industrial sectors. None of the practices
characteristic of the Asian model of development were news to Western investors.
Suddenly they had become "governance issues."
As economist Paul Krugman has argued, after the crisis many in the West have
constructed a narrative of Asia's crash as "a sort of morality play, in which the
economies received their inevitable punishment for the sins of crony capitalism"
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RODNEY BRUCE HALL
(1999:99). Rubin and Summers and U.S. Treasury began this narrative, and
Camdessus and IMF continued it, extended it, and lent technocratic props to
further legitimate it. But the narrative on "good governance" is problematic on at
least two counts. First, while cronyism and corruption were certainly to be found in
Asia, Asian firms had operated for decades with cozy relationships with domestic
banks and government officials. Krugman points out that these were "decades of
spectacular economic growth ... not a pretty system ... but it did function very well
for 35 years" (1999:99-100), and he asks why these flaws should suddenly become
crucial in 1997? Moreover, if the crisis was a punishment for the sins of the Asian
economies, how was it that economies that were by no means equally far down the
path of development experience simultaneous (Stiglitz, 1998a) banking and
financial crises? Much of the evidence points to a too rapid liberalization of capital
accounts, which the IMF represents as a problem of "sequencing." Krugman
suggests they had become vulnerable "not because of crony capitalism, or ... bad
government policies ... [but] ... partly because they had opened up their financial
markets-because they had, in fact, become better free-market economies, not
worse" (1999:101).
But in the IMF narrative,
many of the problems that lie at the heart of Asia's difficulties are bound up with poor
governance. In Korea ... opacity had become systemic ... relationships among
governments, corporations, and financial institutions were ... incestuous ... [and]
... could only result in ... disastrous investment and lending decisions ... lack of
transparency about government, corporate and financial sector operations
concealed the extent of Korea's problems ... [thus] ... the collapse of market
confidence. (Camdessus, 1998a, emphasis added)
It is never made clear as this narrative develops why East Asian nations enjoyed
sufficient confidence of market actors throughout the years before the crisis to
attract investments well in excess of the $100 billion that fled the region when the
crisis ensued. None of the practices Camdessus characterized as "systemic opacity,"
or "incestuous" relations among government, finance, and industry were either
absent or unknown to investors when external capital, seeking the high rents to be
found in Asia, flowed into the region. Both Treasury and IMF narratives would
have us believe that massive, rapid, capital outflows from the region were not due to
a panicked rush for the exits, induced by a herd mentality resulting from excessive
speculation against Asian currencies, but because investors were deceived by Asian
"corruption" and "opacity." Else investors "suddenly realized," in these narratives,
that opacity and corruption were the order of the day in Asia, thus capital flight
became the only prudent course of action.
In a market stampede, the longer one waits to flee the region the less one's assets
are worth. For the IMF representation to be persuasive, we would have to see a
different pattern when this has happened in the past. Simultaneous financial crises
have, however, happened often in the past, with the same pattern of causes and
consequences. Joseph Stiglitz demonstrates that in the last 20 years at least 10
countries have suffered from simultaneous onset of currency and banking crises,
resulting in GDP contractions of 5 percent to 12 percent for the first year of crisis
followed by painfully slow multi-year recoveries. Causes typically include the
overshooting of exchange rate adjustments by currency markets, the withdrawal of
foreign capital, failure of foreign bank creditors to roll over short-term debts, and
internal credit crunches (Stiglitz, 1998a). There is nothing new here. All four of
these problems were present in the Asian crisis. Only the last of these could
ostensibly be a problem involving decisions made in the affected nations alone.
Instances of tight internal credit in the region were effectively managed until the
currency markets attacked regional currencies so severely that typical devaluations
left firms that were holding significant levels of short-term foreign debt in the
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The Discursive Demolition of the Asian Development Model
sudden position of illiquidity. This sudden illiquidity was a result of the requirement
to pay back these short-term obligations in currencies suddenly radically devalued
from speculative overshoots by the currency markets. Analysts as diverse as Martin
Feldstein, in Foreign Affairs (1998), and Robert Wade and Frank Venerosso, in New
Left Review (1998), suggest these liquidity problems might still have been managed
but for the refusal of foreign lenders to roll over the short-term obligations into
longer maturity obligations.
By early February 1998 at the latest Camdessus signaled that he and the IMF
clearly understood that the currency markets had radically overshot the exchange
rates for regional currencies beyond the levels that economic fundamentals would
indicate were appropriate. But he placed the onus for the crisis on the victims. He
admitted "in this respect the markets have overreacted. But ... contagion does not
strike out of the clear blue sky" (1998b). Camdessus argued that more transparency
and surveillance, more flexibility in exchange rates, and further financial liberalization
would resolve the problems. He insisted on further liberalization because in
this representation Asian economies had only been destabilized by "disorderly capital
account liberalization."
Subsequent to this early 1998 address, Camdessus would repeat this representation
of improper or "disorderly sequencing" of capital account liberalization, rather
than the liberalization itself, as a major cause of the turmoil in Asia whenever he
raised the issue of Asian vulnerabilities to newly liberalized capital accounts (1998c,
1998d, 1998e, 1998f, 1999a, 1999b). This representation is abetted by the fact that
South Korea selectively liberalized its capital account by removing restrictions that
encouraged firms to borrow from foreign lenders at short-term maturities, while
retaining restrictions at longer maturities thereby "creating distortions through
selective liberalization" (Lane et al., 1999:73-74). The sources of South Korea's
prolonged trauma are conveniently reduced in this narrative to the unfortunate
effects of a technocratic error.
It is now possible to identify two major discursive agendas common to the U.S.
Treasury and IMF narratives and point to some effects of these discursive
strategies. The first discursive strategy is clearly to uphold, and expand the extant
capital mobility regime at all costs in the teeth of its catastrophic effects in Asia. The
second discursive strategy involved leveraging the crisis to affect the discursive
delegitimation of the Asian development model by equating its key practices with
crony capitalism and corruption, and placing all of the blame for the crisis and its
contagion effect on these "corrupt" practices. These strategies reflect structures of
interests consistent with the structures of identities of these two actors outlined
above, and successfully reconstituted the social meanings of key Asian model
economic practices, thereby altering the conditions of strategic action for Asian
governments.
Korean Government Representations
The crisis broke over the Republic of Korea amidst a presidential election in which
the ruling Grand National Party of President Kim Young-sam lost power to the
National Congress for New Politics led by Kim Dae-jung. Kim Young-sam's
government was forced to appeal to the IMF for a bailout in mid-December 1997.
Kim gave a televised address to the nation in which he took full responsibility for the
economic turmoil and apologized to the nation in abject terms.7 The IMF gathered
the three major presidential candidates to end the public calls, most notably from
Kim Dae-jung, for renegotiation of the terms of the bailout, for fear that international
financial markets would continue to punish the won and continue capital flight from
rapidly devaluing Korean assets. Consequently Kim Dae-jung, even before his
7 Korea Herald, 12 December 1997.
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RODNEY BRUCE HALL
election as president, backed down from confrontation with the IMF8 Upon election
on 18 December as President of the Republic of Korea Kim moved rapidly to
completely embrace the stringent IMF conditionality, and more (OPRK, 1997).
Well before his inauguration on 25 February 1998, Kim made it clear not only that
the new Korean government would not challenge the capital mobility regime, but
would extend it by further liberalizing Korean capital accounts. He assured
international investors that his government would "create a new environment for
foreign investors to invest without fear or reservation ... they will be treated the
same as our own people." The neoliberal language of inevitability was deployed by
one of Kim's surrogates just before the end of the year in asserting the need for
corporate staff reductions. Kim Yong-whan, co-chairman of the interim emergency
economic committee, told the public "layoffs are inevitable at ineffective financial
organizations, including merchant banks whose operations have been suspended."9
The same Kim Dae-jung who had campaigned as a friend of labor was making it
clear he would toe a strict neoliberal line in complete compliance with IMF strictures.
Kim's inaugural address introduced several narratives that were to become key
features of his government's discursive representation of the crisis. It's important to
note that with slight variations, Kim mirrors the Treasury and IMF narratives on
the root causes of the crisis, namely, the narratives on the importance of
transparency and the sins of crony capitalism, whereby the South Korean variant
of the Asian development model is explicitly equated with corruption. In his
inaugural address Kim argued that the crisis "would not have taken place if the
political, economic and financial leaders of this country were not tainted by a collusive
link between politics and business and by government-directed banking practices and ...
large business groups did not have a large number of uncompetitive subsidiaries"
(1998a). Here clearly signaled Kim's commitment to dismantle the Chaebols.
Narrative on Simultaneous Democratization and Development
Later in his inaugural address Kim develops a narrative that was to become a
hallmark of his administration. It became clear as his administration progressed that
the ideas that underpin this narrative are core beliefs and core identity commitments
for Kim Dae-jung. Kim was not suddenly, instrumentally adopting the neoliberal
discourse and its attendant narratives. That discourse had been so pervasive and
intrusive prior to his political career that it had constituted Kim's identity, interests, and
practices. Kim argued that democratization and economic development must emerge
simultaneously, and that transparency in political and economic relations develops as
a matter of course when these goals are pursued simultaneously. "Participatory
democracy must be put into practice ... only then can national administration
become transparent and irregularities and corruption disappear." In spite of the
problems of simultaneous democratization and development so familiar to students
of comparative politics (e.g., Haggard and Kaufman, 1989; Haggard and Moon,
1983; Nelson, 1993; Linz and Stepan, 1996), Kim asserted their inseparability in
solidarity with the long-standing neoliberal narrative. "Democracy and the market
economy are like two sides of a coin or two wheels of a cart. If they were separated,
we could never succeed. Every nation that has simultaneously accepted both
democracy and a market economy has been successful."
Kim's identity as a domestic democratic reformer constituted his interest in
breaking the power of the Chaebols, and the tight links between them and Korean
political parties and financial institutions. In Kim's view, "[w]hen democracy and a
market economy develop together in harmony, there cannot be collusion between
politics and business, government-directed financing and irregularities and
8 Korea Herald, 17 December 1997.
9 Korea Herald, 30 December 1997.
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The Discursive Demolition of the Asian Development Model
corruption" (1998a). Of course neither can the Chaebols control over half of the
economy, own much of the land in the country, or otherwise concentrate economic
power under the reformed conditions Kim described and aimed to bring about.
Kim employed the language of competition and efficiency in justifying Chaebol
reform. When Kim talks about the inefficiency and noncompetitiveness of the
Chaebols, it is code for the underlying concern that he shared with a large crosssection
of Korean society that the Chaebols concentrated too much economic power,
with undemocratic consequences.'0
Korean Representations of Root Causes of the Crisis
While the structure of Kim's identity and interests was very different from that of
U.S. Treasury or IMF, it impelled Kim to engage in discursive delegitimation of
practices associated with the Asian model of development as well. But the extent to
which his representations of the root causes of the crisis mirror those of the U.S.
Treasury and IMF narratives is striking. In a press conference on his 100th day in
office, Kim simultaneously invoked the narratives of the specter of the apocalyptic past
and of the sins of crony capitalism in attributing the sources of the crisis to these
practices, which he equated with not only corruption, but also antidemocratic
authoritarianism. He told the press, "in the past, the Government colluded with
businesses and controlled the financial institutions, ruining the national economy.
Corruption was deeply rooted ... these evil practices were the result of failing to
implement democracy and a market economy in parallel" (1998c).
Kim went further in a commencement address at Stanford University on 13
June. Peddling inexpensive Korean labor and a hyper-liberalized Korean legal
structure that would create a haven for investment capital, Kim deployed a
narrative on the apocalyptic past that conjured up a truly horrendous apparition
before his audience as he recounted the sins of prior administrations. Noting the
partnership of venture capital and "creative talents" in Silicon Valley, Kim sadly
asserted "such talents do not thrive under authoritarian rule ... [where] ... those in
power give special favors and concessions to selected businesses" (1998e).
A thorough devaluation and delegitimation of the Korean past was featured in
this narrative. Unreformed development under prior administrations was
discursively linked to the practices of fascist Germany and Japan. In this
representation, "Germany and Meiji Japan rejected democracy, and only accepted
a market economy. The resulting dictatorship and state operated economy ended
in a dismal failure."'l
The government ... ordered specific companies to invest in specific industries ...
ordered banks to extend vast amounts of low-interest loans to companies colluding
with those in power ... Chaebols received various concessions and were
guaranteed monopolistic profits.
Such a growth model brought temporary, superficial economic growth ... [but] ... the
government-led economy ... weakened growth ... by distorting the distribution of
resources ... aggravated the imbalances in the distribution of economic rewards and
strengthened the corrupt, collusive links between politicians and businessmen. (Kim,
1998e, emphasis added)
The neoliberal narratives representing market processes and market outcomes as
natural, neutral, and inevitable pervades these nested representations. The Treasury
and IMF representations of the root causes of the crisis are reified in Kim's
narrative. This "corruption" and "collusion" generated "monopolistic profits." In
10 I am grateful to Jung Ha-lyong for useful conversations in this context.
1 Evidently Kim believes wartime allied carpet-bombing of German and Japanese industrial centers had no
economic impact.
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RODNEY BRUCE HALL
Kim's narrative it is not surplus transnational capital that is engaged in rent-seeking
behavior, but domestic industrial conglomerates. The three decades of impressive
economic growth generated by these practices, creating the eleventh largest
economy on the globe prior to the onset of the crisis, are systematically devalued in
the narrative. The economic achievements of these decades are represented as
"temporary" and "superficial."
But unlike the U.S. Treasury and IMF representations, Kim's representation of
the "root causes" of the financial crisis in South Korea largely blurs, or more often
omits any representations of proximate causes. The U.S. Treasury and IMF
narratives typically acknowledge a series of events involving transnational capital
actors and market perceptions of technical indicators as proximate causes of
sustained attacks on regional currencies, as well as the associated contagion effects.
Kim's narrative is concerned only with "root causes" and these are systematically
represented in a fashion consistent with the Treasury and IMF narratives on the
importance of "transparency," the evils of government intervention in the
economy, and particularly the sins of crony capitalism. Kim's self-identification as
a democratic reformer permits him to consistently pose as the cure to the
undemocratic virus of cronyism.
Korean Narrative on Crony Capitalism as Root Cause of the Crisis
As Kim and his associates deployed this narrative practices that fall under the rubric
of "cronyism," and consequently as "corruption," include any government
intervention in economic processes or any relationship between government, the
financial sector, or industry transcending short-term contracts governed entirely
by market forces. In this narrative "those who grabbed power in the past had
collusive links with businesses, controlled financing and indulged in corruption
and injustice" (1998f, emphasis added). In November Kim told a meeting of Korean
and Chinese businessmen that the root cause of the crisis had been a "malfunction of
the free market system ... caused by the collusive link between government and
business, government control of the banks and the prevalence of corruption" (1998h,
emphasis added). In other words, Kim represented all governmental-financialindustrial
relations characteristic of Asian model practices as "the problem." And
what is the corrective? "Naturally ... radical reforms to bring about a flexible labor
market and efficient public sector" (emphasis added). Thus Kim evoked the neoliberal
discursive code for union-busting activity and governmental downsizing. This
representation of Asian development model practices as corruption was repeated
persistently; on the 16th in Kim's address to the APEC Business Summit (1998i), on
December 2 before the publishers of Korean Business Newspaper, in May 1999 at
Moscow State University (1999b), in June 1999 at the Outlook 2000 Conference
(1999b), and again at the APEC CEO Summit in Aukland in September 1999 (1999c).
U.S. Treasury and IMF narratives on the importance of financial transparency
are incorporated in Kim's representations on the sins of crony capitalism. This
surfaces most effectively when Kim outlines his policy initiatives to accommodate
IMF conditionality pertaining to "restructuring" the financial and corporate
sectors. In outlining his "five tasks" for restructuring the Chaebols Kim implicitly
charged them with cronyism. Kim represented these tasks as "improving
transparency by issuing consolidated financial statements ... eliminating crossdebt
guarantees among subsidiaries ... improving their capital structures ...
focusing on core businesses and ... increasing legal accountability of major
shareholders and managers" (1998e). Kim prefaced his stipulation of these policy
initiatives by assuring his audience that "I will sever collusive links between
companies and politicians, and free banks from government control. I will root out
corruption. And I will drive economic reform with parallel development of democracy
and a free market economy" (emphasis added). These representations did not vary
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The Discursive Demolition of the Asian Development Model
when Kim and his surrogates were speaking to a domestic Korean audience
(OPRK, 1998b).
The Languages of Imperative, Progress, Inevitability, and Mysticism
In many representations of the policy implications of the financial crisis Kim and his
surrogates assert an imperative to liberalize or restructure Korean institutions and
legal structures to accommodate the dictates of global market forces (OPRK,
1998a). In these representations the reforms are "a matter of survival for the
corporations and for the country" (Kim, 1999b, emphasis added, 1998c; Kang,
1999). We observe a labored attempt in Kim's rhetoric to depict the reforms in the
language of progress. The reforms and neoliberal capitalism are discursively
represented in progressive terms and contrasted with a regressive nationalism.
Sometimes this language devolved into quasi-mystical terms derived from Kim's
adopted Christianity. This appeared as Kim addressed a group of Asian businessmen
in Hong Kong in November 1998 and asserted South Korean economy "is
being born again" into a fair and competitive nation (1998g, emphasis added,
1998i).
This narrative also makes free use of what Louis Pauly has called the "language
of inevitability" regarding the processes of neoliberal globalization (1995). In this
narrative globalization is represented as inevitable. While inviting his countrymen
to embrace a "universal globalism" Kim sternly warned his people "the world has
become a single unit, replacing the nation-state. ... Domestic products that are not
competitive in the world market must be weeded out."12 South Korea must be
"born again" in a "second nation building" because it "can no longer survive
international competition with today's economic system" (1998f). The imperative in
this representation derives from the asserted inevitability of the globalization
process. In Kim's representation the "WTO system ... is bound to eliminate economic
national borders.... We have to compete and cooperate with other countries in order
to survive..." (emphasis added).
The Korean Counter-Narrative Against 'Asian Values"
Kim spoke in similar terms at a dinner hosted by the Mayor of Los Angeles. Kim
explicitly challenged assertions of a difference between "Asian values" and Western
liberal, "democratic" capitalism. Instead, he asserted that "genuine Asian values do
not run counter to democracy, but coincide with it" and proceeded to assert that a
student of Confucius named Mencius had generated the Lockean notion of popular
sovereignty 2,300 years earlier! (1998d).
Similarly Kim represented Suharto's 21 May 1998 resignation in Indonesia as a
"disastrous result of politics which advocates the so-called 'Asian values' that
sacrificed democracy to gain economic development" (1998b). In place of the "selfcentered"
Asian "nationalism" symbolic of "exclusionism and selfishness" Kim was
promoting "universal values which will serve as the supports and pillars of
'universal globalism."'13 Kim represented these universal values as "freedom,
human rights, justice, peace and efficiency" (1998b, emphasis added). Here
"efficiency" may be read as restructuring of the Chaebols to diffuse the
concentration of economic power. Kim similarly denounced "Asian values" in his
commencement address at Stanford University while simultaneously engaging in
the discursive devaluation of the economic accomplishments of the authoritarian
Korean past in representing over 30 years of economic growth under previous
governments as "short-lived" (1998e).
12 The Korea Times, 5 November 1998.
13 Ibid.
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RODNEY BRUCE HALL
Institutionalizing Discourse in South Korea
Many legal and institutional changes have resulted from these discursive projects.
The institutionalization of discourse may be seen as the ultimate constitutive effects
of the discursive reconstitution of actor identities and social meanings of social and
economic practices. The South Korean government enacted the legislation
required to comply with the required IMF conditionality, and undertook additional
liberalizing and restructuring legislative initiatives that went well beyond what the
IMF had required. While legislation initiated in response to an IMF mandate may
be described within a conventional causal framework, the legislation that
transcended the IMF mandates in its intent to transform Korean institutions is a
constitutive effect of the discursive practices described above. The institutional
fabric of the Korean economy was transformed beyond what the IMF required, but
consistent with what U.S. Treasury wanted. This included abolishing fluctuation
limits for foreign exchange rates against the won, total liberalization of mergers and
acquisitions law and laws pertaining to foreign acquisition of Korean real estate, and
removing industrial sectoral restrictions on foreign investment. And these are only
the legislative initiatives that Kim could report by the early summer of 1998.
Much of the IMF conditionality pertained to "governance" issues in Korean
firms. The Korea-IMF memorandum provides that "transparency of corporate
balance sheets (including profit and loss accounts) will be improved by enforcing
accounting standards in line with generally accepted accounting practices,
including independent external audits, full disclosure, and provision of consolidated
statements for business conglomerates" (H.-J. Kim, 2000:69). The
memorandum of agreement also attacked two other key practices of the Korean
variant of the Asian development model, namely, government-directed lending and
the highly financially leveraged nature of Asian firms relative to their Western
counterparts. It specified that "the commercial orientation of bank lending will be
fully respected and the government will not intervene in bank management and
lending decisions" and that the Korean government would develop a plan "to
encourage the restructuring of corporate finances, including measures to reduce
the high debt-to-equity ratios of corporations" (70).
A number of Korean statutory changes were made to deal with these IMF
conditions as well as issues of concern to the U.S. liberalization agenda, and Kim's
agenda to reduce the concentration of economic power in Korea as part of his
democratization agenda. Most of the problems represented in the Treasury, IMF,
and Korean narratives on the "root causes" of the crisis are addressed by these
statutory changes.
Most of the statutory initiatives regard changes to the Korean Securities and
Exchange Act (KSEA) and the Korean Commercial Code (KCC). They are oriented
toward enhancing managerial accountability, holding managers liable for mismanagement
or misconduct, and enhancing the status and rights of minority shareholders
(H.-J. Kim, 2000:73). Prior to these changes principal shareholders whose share
exceeded 5 percent of the outstanding shares controlled all facets of corporate
operations, selecting board members based on personal loyalty to principal
shareholders, making it impossible for directors and corporate auditors to act
independently from principal shareholders (J. Kim, 2000:279-280). This marginalized
other shareholders including institutional investors (such as Wall Street mutual fund
managers) who were barred from participation irrespective of their shareholdings.
In response to this the IMF had mandated inclusion of outside directors. The
Korean government amended the KCC to mandate one outside director for every
three officer-directors for listed companies, and amended the Korean stock
exchange rule in February 1998 to enable enforcement. Similarly, in the banking
sector, the Korean Banking Act (KBA) was amended to mandate that non-office
directors must be in the majority in the board room (H.-J. Kim, 2000:74).
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The Discursive Demolition of the Asian Development Model
The issue of accountability (especially of Chaebol directors) was dealt with to
eradicate the previous practice by which Chairmen, who were principal shareholders,
would register as directors only in the primary corporations of the conglomerate,
minimizing their legal responsibility, while cross-ownership among Chairmen helped
to hold companies within the conglomerate (J. Kim, 2000:284-287). The new KCC
also generates legal liability for others who employ their influence on directors (289).
The KCC reforms auditing practices, guaranteeing auditors an opportunity to
inform shareholders of circumstances surrounding auditor termination from
employment by the firm, allotting them the right to convene a shareholders'
meeting at their discretion, extending their term of office from two to three years to
match the term length of directors, and barring individuals from being auditors of
parent companies and directors of subsidiary companies simultaneously. The rights
of (nonemployee) shareholders are strengthened in the KCC in a number of ways
by decreasing the minimum shareholding standards to be accorded a number of
rights, and establishing a proxy vote where previously a shareholder was required
to attend the shareholders' meeting to vote their shares (J. Kim, 2000:293).
The new KSEA completely liberalized mergers and acquisitions law and made it
possible for "direct hostile acquisition of Korean firms by foreign investors"
through tender offers (H.-J. Kim, 2000:78-79), which applies to not only the
industrial sector but the financial sector as well. This was accomplished by further
amending the December 1996 Law for Structural Improvement of the Financial
Industry, also in response to the amended Korea-IMF memoranda which not only
mandated lifting ownership ceilings on bank shares and restrictions on foreign
acquisition of a controlling interest in Korean banks, but also financial sector
restructuring, which "could involve ... mergers and acquisitions by domestic and
foreign institutions" (84).
It is difficult to see how Kim's domestic democratization agenda is served by foreign
acquisition or control of Korean banks, though it is easy to see how U.S. Treasury's
agenda is advanced by this move. This, and other liberalizing measures that were not
mandated by the IMF (or by U.S. Treasury through the IMF), appear to be an abject
bow to the growing authority of market forces and the expanding capital mobility
regime. Ironically, in spite of the fact that Western capital actors are the overwhelming
beneficiaries of these measures, the IMF memorandum specifies the moral hazard of
Korean borrowers as their target. In the industrial sector, the KCC was similarly
modified to relax voting procedures regarding M&A issues (. Kim, 2000).
The Basic Labor Law was amended to comply with IMF conditionality to
improve "labor market flexibility." Concessions that had been won through the
political process by Korean labor unions were mandated out of existence by the
IMF. The new law permits companies to lay off workers "when they face an
'emergency' situation ... [or] ... sale of business or mergers to avoid financial
trouble" (H.-J. Kim, 2000:80) or essentially at will. The Basle Accord standards
were mandated by statute "as a prudential measure to ensure capital adequacy of
Korean banks." These specify what the capital banks should have on hand to cover
nonperforming loans, and are quite conservative relative to prior Korean banking
operations. Legal scholar Hwa-jin Kim has observed that "the normative power of
the BIS rules has become tremendous in the Korean financial community since the
recent involvement of international lending agencies" (86). So much so that
"Korean commercial banks ... have become so sensitive to the BIS standards that
they almost blindly called in outstanding loans to borrowers, which has resulted in
sudden bankruptcies of affected firms" (87).
Conclusion
It is through these statutory changes and their attendant institutional effects t
the discourses I have analyzed in this article have been institutionalized. I do n
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RODNEY BRUCE HALL
argue that these institutional effects are the effects of discourse alone. IMF
conditionality and access to tranched credit provide the impetus for many of the
statutory changes. But I do argue that the successful discursive attacks on Asian
model practices coupled with the severe economic effects of the crisis generated a
normative environment for policy formation that severely constrained resistance to
the radical restructuring of the institutional and legal framework of the Korean
economy than would otherwise have been expected. Defense of these practices
became untenable when these practices had been successfully discursively
reconstructed as corruption, while a move to market-based outcomes and
decision-making had been successfully discursively reconstructed as ethical and
authoritative. The major mechanism by which ideas are transmitted into the policy
arena is through discourse, or arguments. In this context, discourse is high politics.
If actors did not expect discursive practices to generate these constitutive effects, it
is difficult to explain why they labor so diligently on the construction of
representations and narratives of the form I have just analyzed to construct and
reconstruct the social meanings of the policy preferences of other actors, thereby
reconstituting the normatively legitimate parameters of state policy, altering the
conditions of strategic action for these actors.
This labor was rewarded for U.S. Treasury, the IMF, and the Kim Dae-jung
government in Korea. Each of these actors generated a discursive representation of
key practices associated with the Asian development model as cronyism and
corruption and thereby normatively delegitimated these practices. Each engaged in
these discursive representations in response to a co-constituted structure of
identities and interests generated by the encroaching, pervasive, meta-narrative of
disciplinary neoliberalism. For U.S. Treasury, the normative delegitimation of Asian
model practices bolstered the capital mobility regime by delegitimating challenges
to it, and generated pressure for liberalization of Asian markets for the benefit of
Western firms in general and U.S. firms in particular. It signaled to the financial
markets the legitimacy of their practices, their authoritative status as policy
determiners in the global economy, and that they could (and should) continue to
punish regional states that did not quickly move to dismantle Asian model practices.
For the IMF the normative delegitimation of Asian model practices enhanced its
identity as technocratic shepherd of the wayward, and its claims that it needed
access to stronger surveillance mechanisms-such as the Special Data Dissemination
Standards (SDDS), extended facilities for lending, and enhanced recapitalization
of the Fund-so that greater lending could be effected in the future, enhancing
the global reach and "neo-civilizing mission" of the Fund, and deflecting criticism of
the Fund's crisis response.
For the Kim Dae-jung administration, the normative delegitimation of Asian
model practices reinforced Kim's identity as reformer and democratizer, and
provided a useful normative policy environment for reducing the concentration of
economic power in the South Korean economy. The utility of the same narratives
for reconstituting the identities and interests of the finance ministry of the world's
largest state, for an international organization, and for a democratic reform-minded
head of state of a newly industrialized country, confirms the burgeoning potency of
the neoliberal globalization discourse, and the emerging authority of the global
markets that are the principal institutionalizations of this discourse.
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