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[Classic] #22. “International Political Economy in Transition and Korea” by Yoon Young-Kwan

“International Political Economy in Transition and Korea” by Professor Yoon Young-Kwan analyzes the changes in global capitalism and the political economy of Korea. It emphasizes the need for an independent economic development strategy and highlights the importance of South-North Korean cooperation and East Asian regional cooperation in the context of globalization.

I. Author Introduction

Yoon Young-Kwan

Professor Yoon Young-Kwan graduated from Seoul National University’s Department of Foreign Affairs and obtained his master’s and doctorate degrees in international politics from Johns Hopkins University. He served as the Minister of Foreign Affairs in South Korea and is currently a professor at Seoul National University’s Department of Political Science and International Relations. He is also the chairman of the Peace Foundation for Korea and a senior advisor at the Institute for Future Strategies.

II. Background

The main purpose of this book is to introduce the field of international political economy to readers and to highlight how the separation of politics and economics, international and domestic, is often artificial in today’s complex social phenomena. Professor Yoon addresses the need for a theoretical framework to analyze international economic relations from a strategic and political perspective in Korea. This book comprehensively covers the changes in global capitalism and their political implications, as well as the developmental direction of Korean political economy.

III. Summary of the Work

1. Changes in the International System and Global Capitalism

(1) Post-Cold War Political Leadership and the Role of the United States

The collapse of the Soviet Union brought about structural changes in the international system, necessitating adjustments in relations among major powers. In such transition periods, political leadership that provides order and stability is crucial. During the Cold War, the U.S. role was to protect Western Europe and Japan from the Soviet threat, but in the post-Cold War era, its role shifted to managing the rise of Japan and Germany.

(2) Challenges to the International System and Changes in Capitalism

After World War II, the U.S. served as the hegemonic power that formed and maintained the global capitalist order. However, the rapid economic growth of Japan and Western Europe in the 1970s led to the relative decline of the U.S., weakening the effectiveness of international institutions. This resulted in countries forming blocs to increase interdependence.

(3) Changes in International Economic Order and Post-Cold War

In the 1990s, the post-Cold War world economy faced various issues, particularly in trade and financial sectors. The U.S.’s economic decline led to the collapse of the fixed exchange rate system and the adoption of floating exchange rates, increasing the complexity of the international order.

(4) Hegemonic States and International Political Economy Order

The relationship between hegemonic states and the international economic order is a key issue in international political economy. While the hegemonic stability theory argues that a hegemonic state is necessary for a stable and open economic order, neoliberal institutionalists believe cooperation is possible without a hegemonic state. Korea must analyze structural changes in the international system to pursue autonomy within a new polycentric power structure.

(5) The Political Economy of International Cooperation – The 1985 Plaza Accord

The Plaza Accord is a notable example of multilateral cooperation to address international economic imbalances by adjusting exchange rates among major currencies. However, it led to the formation of the Japanese bloc, playing a crucial role in the advent of bloc capitalism.

2. Economic Mechanisms of Hegemonic Decline

(1) Political Economy of Overseas Investment and Productivity – Late 19th Century Britain and Post-World War II U.S.

The decline of hegemonic states is associated with large-scale overseas investments and domestic productivity growth rate declines. Both Britain and the U.S. experienced significant capital outflows, accelerating their economic decline.

(2) Political Economy of Transition – Japan’s Overseas Direct Investment in the 1980s

Japan’s overseas direct investment initially focused on natural resources and low-tech manufacturing but shifted to high-tech investments in developed countries in the 1980s. Japan’s strategic use of industrial linkages and long-term market strategies contributed to its success in overseas investments.

3. Is Japanese Capitalism Changing?

(1) Political Economy of Japanese Finance – Character Changes and Post-Cold War

Post the first oil shock, Japan’s financial system transitioned from a state-centered to a market-centered system, leading to greater integration with the global economy.

(2) Financial Liberalization in Japan and Korea – Focusing on the Banking Industry

Both Japan and Korea pursued financial liberalization, but Korea faced external pressure leading to its market being dominated by foreign financial firms. Korea needs institutional reforms to enhance the competitiveness of domestic banks.

(3) Internationalization of the Japanese Economy

The internationalization of the Japanese economy was driven by external pressures and internal needs. Japan responded to trade imbalances by appreciating the yen, deepening its internationalization.

(4) Post-Cold War Korea-Japan Relations – Focus on Japan’s Foreign Strategy and U.S.-Japan Relations

Cold War-era Korea-Japan relations were influenced by U.S. strategies. In the post-Cold War era, Japan’s rising political and military influence necessitates a more independent Korea-Japan relationship.

4. International Political Economy in Transition and Korea

(1) Changes in East Asian Economic Order and the Political Economy of South-North Korean Cooperation

East Asian economic cooperation is forming small economic blocs based on ethnic proximity. Korea should prioritize economic cooperation with North Korea to strengthen its negotiation power in the region.

(2) East Asian Regional Cooperation in Light of European Integration and Korea’s Strategy

EU integration serves as a model for regional cooperation. East Asia should develop similar cooperative frameworks to enhance regional integration.

(3) Political Economy of Unification – Germany and Korea

The economic disparity between North and South Korea is much greater than that between East and West Germany. Korea needs to develop its own institutional framework for unification, considering unique economic and social conditions.

(4) Globalization – Towards a New Horizon of Nationalism

Globalization challenges national sovereignty and territorial integrity. Korea needs to strengthen international cooperation and improve its economic structure to adapt to globalization.

IV. Memorable Passages

  • “U.S. political leaders must not become captives of domestic interest groups.”
  • “In Korea, rather than importing specific types of capitalism, we should refer to the trajectories of those capitalisms to inform our future direction.”

V. Reflection

This book delves into the complexity of international political economy, highlighting the interconnectedness of politics, economics, international, and domestic issues. Professor Yoon emphasizes the need for Korea to develop an independent economic development strategy within the global order. The analysis of Korea-Japan relations and East Asian economic cooperation provides important insights for future policy directions.

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