ROLE OF THE CONSTITUTION AND THE LAW IN KOREA’S ECONOMIC DEVELOPMENT

- The Final Research Results Supported by the KFAS International Scholar Exchange Fellowship Program ROLE OF THE CONSTITUTION AND THE LAW IN KOREA’S ECONOMIC DEVELOPMENT (VAI TRO CUA LUAT VA HIEN PHAP TRONG PHAT TRIEN KINH TE HAN QUOC) Laureate.
- 12 CHAPTER II Role of the Constitution and the Law in Korea’s Economic Development.
- Role of the law before the 1997 economic crisis.
- Role of the law after the 1997 economic crisis.
- Table 3: Contents of four major structural reforms 34 INTRODUCTION Korea was one of the poorest countries in the world immediately after the Korean War.
- But when the economic crisis hit Korea at the end of 1997, the distorted structure of the Korean economy has been exposed.
- For Asian countries, not respecting the principle of the rule of law is one reason of the economic crisis in 1997.
- This was one of the findings of institutional studies in Asian Economic Development (1960-95) sponsored by the Asian Development Bank.
- The responsibility of the State in maintaining economic development based on the constitution and the laws.
- The lack of the rule of law is a consequence of “crony capitalism”, ridiculing this as an inevitable by-product of Asian values.
- No matter how fierce competition may be, a market economy must be a place where the rule of law reins, not the law of the jungle.
- Throughout history, notions of the law’s role have shifted dramatically.
- The implications for the role of the laws and the form of public intervention can be quite different in each case.
- People and firms may lack knowledge of profit opportunities or of the probity of potential business partners.
- Once a foundation of lawfulness is in sight, the focus can turn to the ways in which specific parts of the legal system can buttress property rights.
- And more broadly, it can help win public acceptance of the fairness and legitimacy of market outcomes.
- As liquidity drains out of the system, even solvent banks may be forced to close.
- Harder still is doing it without depriving state agencies of the flexibility they need to do their job.
- It alone has access to the coercive authority of the state to enforce judgments.
- The effectiveness of the judiciary also depends on its decisions being enforced.
- It is a symptom of problems at the intersection of the public and the private sectors and needs to be combated through a multi-pronged strategy.
- Here we focus on the remaining two parts of the strategy.
- Some corruptions stem from opportunities generated by the policy environment, at the bottom or the top of the hierarchy.
- Economic analysis of the law suggests that individuals weigh the expected benefits of breaking the law against the expected costs (the probability of being caught and punished multiplied by level of punishment).
- In general, any reform that increases the competitiveness of the economy will reduce incentives for corrupt behavior.
- Independent watchdog institutions that are part of the government structure can also curb corruption.
- The State is responsible for maintaining stability and economic development by the constitution and the laws of the land.
- CHAPTER II Role of the Constitution and the Law in Korea’s Economic Development 1.
- Strict implementation of the laws with respect to foreign investment over the past three decades has been viewed as one of the factors contributing to the economic success of Korea.
- The role of the law before the 1997 economic crisis may be distinguished into two periods: Korea's Legal System in the early 1960s and the period covering .
- The basic policy stance was to minimize the intervention of the government and pursue a laissez-faire type of free market economy.
- The disposal of reverted properties combined with land reform resulted in the collapse of the landlord class and the emergence of new commercial or industrial capital.
- These were closely related to the first of the above functions of government, namely the establishment of an economic and legal framework.
- These define the nature and scope of the economic system and the economic environment in general.
- As the situation persisted for two decades, the dominant position of the government as the problem-solver became even stronger.
- Nationalization of banks was carried to control the supply of credit, since it was essential to the government's management of the economy.
- Recently, there has also been evidence of the impact of the laws of non-civil law countries.
- Korea is a member of the World Trade Organization (WTO).
- In some cases, the enactment of these economic laws has resulted in the acceleration of the speed of economic development.
- The revisions included the introduction of the concept of authorized capital within the context of stock firms.
- the establishment of a council system and the concurrent decrease in the powers of the shareholders' general meeting and auditors.
- and an increase in the overall power of the council.
- some of the government-led investments in HCIs turned out to be inefficient, leading to the subsequent realignment of investments and rationalization measures in the 1980s.
- During the 1970s, the government also tightened control over economic activities at the private level by means of the law.
- From 1975 to 1979 in the aftermath of the oil crisis, the government further tightened its grip on the economy by adopting widespread price controls.
- Subsequently, new laws and policies were formulated and implemented in the 1980s in an effort to strengthen the functions of the market mechanism and to cure the imperfections found in the government's management of the economy.
- The 1980s witnessed a series of new laws and policies to strengthen the functions of the market mechanism and to cure the imperfections found in the government's management of the economy.
- Although the economy was still under strong government control, these forces began forming a main trend in substituting the role of the law.
- In respect of the legal arena, it is possible to identify many legislative activities, which were undertaken in the endeavor to upgrade the quality of the laws.
- As the economy grew more complicated, the once significant role of the government began to decline and a market mechanism began to replace the state.
- This gradual process of the market substituting for the state has taken place.
- One of the clearest examples of this trend may be found in the field of intellectual property (IP) law.
- In the late 1980s, all of the major labor laws were also significantly amended to enhance the level of protection of workers' rights.
- In summary, the period saw the gradual improvement in the legal system in support of the requirements for economic development.
- Popular Attitudes toward the Legal System Several studies have been undertaken over the past few decades to investigate the legal consciousness of the Korean people.
- ability?" 31.9% of the respondents in 1991 agreed, while 68.1% reacted negatively to the concept of violating the law.
- Thus, over half of the people surveyed were critical of the legislative and executive organs.
- Of the remainder, 19.9% claimed that it because law was unfair.
- Thus, it is possible to see a contradiction between the belief that violation of the law is wrong and the practice in fact of poor observation of the law.
- The source of the problem is the traditional disregard for the rule of law in Korea.
- Although ownership of the commercial banks was handed over to the private sector, the government continued to intervene in their management.
- Moral hazards in finance proliferated and discipline in the financial institutions evaporated, not for want of prudential regulations but because of the government’s inability to enforce them.
- The democratization process in Korea sine 1987 was so limited and distorted, however, that it contributed little to the promotion of the rule of law.
- It seems fair to conclude that success of the Korean reform drive hinges on establishing the rule of law.
- We are then faced with the question of whether it is possible to demonstrate a positive relationship between economic development and the increase in the significance of the role of the legal and dispute settlement systems over the past few decades.
- It is not possible to boldly conclude, simply on the basis of data demonstrating the transformation from a humble legal system in the 1960s to the functional and effective legal system of the 1990s, that this development have directly contributed to economic development.
- One of the most important characteristics of role of law is the maintenance of judicial independence, even though the degree of independence may vary according to the different departments.
- The independence of the courts in particular is concerned principally with the separation of powers between the legislature and the executive.
- In Korea, the major challenge of the courts has been the maintenance of its proper political authority in the conduct of trials, against encroachment by the executive branch.
- The fundamental democratic principle of the separation of powers is enshrined in the present Constitution, as too is the principle of judicial independence.
- With the inauguration of the then government under Kim Young Sam, true independence on the part of the judiciary seems to have been realized.
- In the area of legal institutions and the dispute settlement system, it does not appear clear that there has been an obviously positive relationship between economic development and the increase in the significance of the role of the legal and dispute settlement systems over the past few decades.
- Secondly, although violation of the law is increasingly regarded as unacceptable, Koreans generally do not consider law to be effectively observed in modern society.
- Thirdly, negative attitudes toward the legislative and executive organs of the Korean legal system have gradually intensified over the past three decades (Shin, Kwang Shik and Chang Seung Wha, 1997)..
- Role of the law after the 1997 economic crisis For more than 30 years, Korea enjoyed stunning economic growth.
- But when the economic crisis hit at the end of 1997, the distorted structure of the Korean economy was exposed.
- The committee has already proven effective in implementing reforms of the financial sector.
- The restructuring of the financial sector was central to structural reform program.
- In the Republic of Korea, the corporate restructuring currently underway is similarly designed in part to limit the economic power of the Chaebols (although concerns exist that this process of rationalization may actually increase concentrations of power in certain industries).
- A further essential change pertains to the composition of the board of directors.
- Thirdly, transparency of the government has been enhanced to achieve ”Open Government” and serve the public more effectively (Chang Seung- wo, 2003).
- Lack of respect for the principle of the rule of law is one major reason for the 1997 economic crisis.
- For this reason, too, the influence of the family on the Korean management system – in both business and government – has been highly significant.
- The relationship between the father and his eldest son is the backbone of the Korean family system.
- The power of the father usually transcend to the first son.
- There is another area in which Korea’s culture of the extended family exerts a strong influence: corporate structure.
- Under the government’s export promotion strategy,’ survival of the fittest’ among competing firms was not determined in the market-place, not law, but through discretionary government’s actions, ‘loyalty to the country through export’ (Song, Byung-nak, 1990).
- Furthermore, successful institutionalization of these principles requires a strict adherence to the principle of the rule of law.
- The restructuring agenda of the financial sector reveals the need for reforms to increase the legal liability of management.
- Improving governance of the financial institutions does not necessarily entail setting up a legal system modeled on that of the West.
- In a political exploitation of the “consumer.
- But many Asian countries do not respect the principle of the rule of law.
- In summary, lack of the rule of law is a byproduct of Asian values.
- An important component of governance in the post-crisis period will be to reform and strengthen state institutions, particularly with respect to regulation through the instruments of the law.
- Fukuyama Francis, 2001, Asian values in the Wake of the Asian Crisis, in.
- Song, Byung Nak, 1990, The rise of the Korean economy, Center for Korean studies, Seoul, Hong Kong, Oxford university press.
- Song, Byung Nak, 1997, The rise of the Korean economy, Center for Korean studies, Seoul, Hong Kong, Oxford university press..
- You, Jong- keun, 2001, “Democracy and the Role of the Media,” in Creating a Dynamic Future: Local to Global Initiatives, Chonju, Korea, pp 9-23.
- State responsibility is to maintain economic development in accordance with the constitution and the laws of the land.
- The role of the constitution and the law in the economic development of Korea may be divided into three (3) periods and after the 1997 economic crisis