How Is the Welfare State Possible under Neoliberalism? Uneven Neoliberalization in Taiwan and South Korea in the 1980s and 1990s

Terrence Chen, New York University

In the 1980s and 1990s, financial liberalization coincided with the expansion of the welfare state in Taiwan and South Korea. The two development is contradictory in that the first was aligned with the worldwide neoliberal policy paradigm to expand the market economy, while the latter was not neoliberal but resembled social democratic agendas. How can we understand this phenomenon of “uneven neoliberalism,” where neoliberalization happened in certain policy domains but not in other domains? By comparing the history of two policy issues — financial liberalization and pension reforms — in the two countries, I identify two possible pathways to uneven neoliberalism. The pathway in Taiwan was what could be called “many hands of the state,” where an institutional division of labor between different policies provides the basis for two contradictory policies to be advanced at the same time within a state. On the other hand, the pathway in South Korea was mostly ideational, where the leading political actors adopted an eclectic policy paradigm that simultaneously emphasized partial liberalization and strategic state intervention, which could be employed in both financial liberalization and pension expansion. This paper contributes to existing discussion of “actually existing neoliberalism” by empirically identifying mechanisms producing the internal inconsistencies of neoliberalism within a state. The findings could also shed light on how social democratic reforms are possible even when left parties are not in power and neoliberal ideas are prevalent around the world.

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 Presented in Session 3. Capitalism, Neoliberalism, and the State in Southeast Asia