A virtuous debtor: South Korea in the Eurocurrency market, 1969 – 1984

Abstract

This article examines the case of South Korea, in which the external private debt management leveraged the symbiosis of the authoritarian regime and the neoliberal policies in a less-developed country. In the pursuit of post-war growthamship, against the meddling of allies with official loans, the military government turned to the Eurocurrency market, an offshore market for major currencies to meet the triple goal of diversifying foreign reserve sources, financing the heavy-chemical industrialization, and underpinning the diplomatic struggle against North Korea. The dependence on the Euro-capital empowered technocrats at the Economic Planning Board to manage the sovereign borrower’s external indebtedness. Against the neo-mercantilist policy, they introduced price stability measures and maintained low debt-service-ratio so as to appease international banks and international financial organizations. Their success enabled the military government to eschew the debt crisis of 1982 and bolstered the legitimacy of the military government. In return, the technocrats resorted to the authoritarian rule to implement market-oriented policies against the labor the neo-mercantilist interests. Drawing on multi-archival sources, this article engages to the burgeoning scholarship on the relations between international banks and authoritarian regimes by analyzing the external debt-driven neoliberal turn in the developing world.