Since the Korean economic crisis broke in 1997, Korea's state-led model of economic development has come under heavy criticism. In particular, it has been argued that Korea's well-known triangular system connecting the government with big business and banks resulted in an inefficient financial sector and a highly leveraged corporate sector that lacked effective market discipline (IMF 1997). What is conspicuously missing in this line of criticism, however, is the recognition that the same system served as the backbone of the “rapid, shared growth” (World Bank 1993) which catapulted Korea from one of the poorest countries in the world into the ranks of the OECD countries in thirty years. No criticism of the Korean economic system would seem convincing without some explanation for its apparent success over those three decades.

This general observation on the rise and fall of the Korean economic system can be applied equally well to the chaebol, family-based business groups that dominate the Korean economy. The chaebol have long been a contentious issue in Korea (Cho 1990; Kang, Choi and Chang 1991), and in the wake of the economic crisis, it is tempting to issue a wholesale condemnation against them. This criticism of the chaebol, however, has to be reconciled with an appreciation of the role that they played in Korea's economic development (Amsden 1989). Although the 1997 crisis undoubtedly provided an impetus for chaebol reform, the fact that the chaebol were widely blamed for the crisis does not, of and in itself, establish causality.