From Catch-up to Convergence? Re-casting the Trajectory of Capitalism in South Korea

Abstract:This paper raises a fundamental question with regard to the trajectory of capitalism in Korea, whether Korea is still “fast-following” developed countries and on-track to converge with their economic systems, or continues to forge a unique development path different from that of the mature capitalist economies. In an explorative effort to answer this question, this paper compares the key outcome variables of the Korean economy with those of other economies by taking the variety of capitalism (VoC) perspective. Existing evidence may point to the possibility of Korean capitalism converging with a U.S.- and U.K.-style liberal market economy (the so-called “Anglo–Saxon” economy) in terms of slow-down of growth, rising unemployment, and higher income inequality, despite the differences in several underlying institutions, such as the national innovation systems and corporate governance and ownership. The driving forces for convergence seem to be the ongoing trend of financialization and the rise of shareholder capitalism, which is perceived to be the cause of low investment and high inequality. This paper is one of the first calls to consider a switch from the existing “catch-up and post catch-up” framework to the new “catch-up and convergence” framework when assessing the past, present, and future capitalism in South Korea.