South Korea - ReviseSociology

South Korea is one of the real success stories of development post world war two, but what policies led to it rapid economic and social development?

NB – you might like to read part one of ‘Explaining South Korea’s Development‘ first!

During the early phases of its economic development, there were few vested interests In South Korea to oppose Import Substitution Industrialization: there was no landlord class (like in South America) and no foreign ownership of industry (like in much of Africa), so there were no vested ‘extractive’ interests to block the consumption of imports which was required to boost manufacturing.

During the 1980s South Korea also benefited from global political and economic trends: it gained an ally in America who wanted a stronghold in Asia to prove that a free-market economy was a viable alternative to communism; it was also able to benefit from the increasing global demand for cars and other industrial products – cheaper labour in South Korea meant it was eventually able to build a very successful automobile industry, spruing on the decline of manufacturing in places like Detroit.

The Hyundai factory in Ulsan is now the biggest automobile factory in the World, an honor which used to belong to the River Rouge Ford Factory in Detroit.

By the 1990s South Korea was being categorized as a Newly Industrialized Economy…however, the idea that this success was because of neoliberal policies is a myth. Rather, the strong economic growth post WW2 was because the authoritarian government (not beholden to either of the vested interests above) was able to protect industries, much in the same way as Britain and America did during their strong phases of economic growth.

In short, South Korea’s economic success is because the state played a highly interventionist role in steering, stimulating and constraining the market.

Korea was a Japanese Colony from 1910 to 1945, providing food and fuel for the ‘motherland’.

Following the fall of the Japanese Empire at the end of World War II, Korea was divided along the 38th parallel into North and South Korea, North Korea controlled by communist Russia, and South Korea governed by the United States, pitching Communist and Capitalist modes of development against each other.

Following the brutal Korean War of 1950 to 1953 (which was the first war of the ‘cold war’ and was brutal enough to result in 4 million deaths) both North and South Korea lay decimated: plundered by 50 years of colonial rule and then a decade of fighting their infrastructures lay in ruins.

South Korea’s economy stagnated in the decade following the Korean war, but then grew rapidly, and today South Korea is one of the world’s leading economies, whereas North Korea stagnated under hard-line communist rule.

Given the fact that the two countries share common histories up until the end of WW2, and given that they share similar cultures and climates, these things cannot explain their divergent experiences in development since 1950 – and thus South Korea’s development (and North Korea’s lack of it) can only be explain by the social and economic development strategies (and their consequences) adopted by the South Korean government since the 1950s.

Following the war South Korea received some support for reconstruction from the US. As a percentage of gross national income South Korea received a very similar level of support to Kenya in the 1960s. But International Development Assistance was not the answer to Korean poverty. USAID reported that Korea was a ‘bottomless pit’ that could not be helped by development funding.

In 1961, when General Park Chung-Hee came to power in a military coup, South Korea’s yearly income was just $82 per person (for comparison Ghana’s was $179 at the time). In 1962 Park turned civilian and went on to win three elections before seizing the presidency for life. His rule was strict and South Korea was a highly disciplined society.

Park surrounded himself with able colleagues and made some astute political moves: During the Vietnam war, South Korea sent troops to support US efforts and was richly rewarded. In the mid 1960s, revenues from the Americans for Korean troops in Vietnam were the larges single source of foreign-exchange earnings.

Park was authoritarian and stifled liberties, but he put in place policies which effectively modernized South Korea.

Five year plans for economic development were at the heart of his strategy. Growth was steady during the 1960s as new factories producing basic goods were built, and in 1973 Park launched the ‘Heavy and Chemical industrialization programme’ which estalished the first steel mills and car manufacturing plants, which formed the backbone for industrial development and moved South Korea away from reliance on agricultural products.

As a result of Park’s economic policies, Per Capita income grew by more than 5 times between 1972 and 1979, reaching $1000 per capita by 1977, and all of this with very little reliance on aid.

Growth depended on Import Substitution Industrialization (ISI), which mean reducing dependence on imports and replacing them with domestically produced products. In practice this meant protecting basic goods such as clothing, hand tools and processed food.

Citizens were also heavily disciplined: they were mobilized like soldiers into factories and consumption was also tightly controlled: for example, foreign cigarettes were band, and citizens were encouraged to report anyone smoking imported tobacco products.

Every spare cent of foreign exchange earned from exports was used to import new machine imports to further industrialization and over many years South Korea’s manufacturing processes evolved to become more and more technologically sophisticated and eventually the nation transitioned to producing manufactured goods for export to foreign markets.

The history of the Samsung Corporation illustrates the successful development of the South Korean economy.

Samsung began selling dried fish, fruit and vegetables to China in 1938, before moving into flour milling and confectionery manufacturing, then textile weaving. In the early 1970s it invested in heavy, chemical and petrochemical industries and produced the first black and white television for domestic sale in South Korea in 1972. In the second half the 1970s Samsung moved into producing home electronics for export, and today is one of the world’s leading technology companies.

The result of all of this is that South Korea has seen one of the fastest rates of economic growth since WW2 – it’s GDP was over $28 000 in 2016.

However, South Korea’s development did come at a cost: political freedoms were limited (although Korea is now a democracy) working hours were very long, and gender inequality high. Today, South Korea has one of the highest suicide rates in the world and widespread alcohol dependency.

Sources:

Summarized from Brooks (2017) The End of Development.