JC History Tuition Online - How did South Korea grow so fast - Asian Tigers Notes

How did South Korea grow so fast?

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Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 3: Rise of Asian Tigers from 1970s to 1990s [South Korea and Taiwan] 

Find out more about the railway development in South Korea. [Video by Railways Explained]

Historical background
Before South Korea transformed to an advanced economy, it was in a desolate and backward state. Between the 1950s and 1960s, South Korea was largely dependent on agriculture. Unfortunately, the Korean War further set the nation back as the destruction wrought by conflict left much of its infrastructure in ruins.

Under the regime of President Syngman Rhee (이승만), South Korea relied on foreign aid and assistance, which mainly came from its Cold War ally, the USA. Even so, South Korea experienced high unemployment and widespread poverty, thus the aim of economic transformation seemed improbable at that time.

[…] Korea’s GDP per capita in 1950 was $156, lagging against Ghana and the Philippines. In many ways, it was the poster child of an underdeveloped and fragile state among the lowest income group of nations, according to the World Bank. Income levels were lower than that of most Asian countries, similar or lower than that of most African countries in those days, and much lower than many South American countries such as Brazil and Argentina.

An excerpt taken from “The Economic Development of South Korea” by Seung-hun Chun.

Phases of Economic Development
In summary, the economy of South Korea went through three key phases:

  1. 1954-1960: Import-substitution industrialisation
  2. 1961-1979: Export-oriented industrialisation
  3. 1980-1990: Stabilisation and diversification

On 16 May 1961, General Park Chung-hee (박정희) launched a military coup d’état, replacing President Yun Po-sun (윤보선) with himself at the apex of the political structure. Afterwards, Park declared martial law, which lasted for 29 months until October 1963. The military government pursued two key aims: poverty elimination and political stabilisation.

State-guided industrialisation under Park
The Park regime then introduced its very first Five-Year Economic Development Plan (1962-1966) to transform South Korea. As a result, the Economic Planning Board (EPB) was established. The EPB, which was initially known as the Ministry of Construction, was tasked with planning, budgeting and the attraction of foreign capital. In essence, the EPB focused on policy coordination through budget allocation.

In addition, two think-tanks were set up to support the government’s economic policies in the late 1960s, such as the Korea Institute of Science and Technology (KIST). Formed in 1966, the KIST’s main role was to undergo research and development (R&D) to support national efforts to achieve economic growth. This institute helped with the process of industrial modernisation, as seen by technological breakthroughs like the development of Korea’s first colour television in the early 1970s.

KIST made important contributions to growth of the shipbuilding, steel, chemical and electronic industries in Korea. The success of KIST led the Korean government to set up subsequent state-funded research institutes dedicated to research relevant to specific knowledge-intensive industries, including the Korea Institute of Machinery and Materials, the Korea Institute of Chemical Technology, and the Electronics and Telecommunications Research Institutes. In 1970, these state-funded institutes accounted for 58.51% of total nation R&D expenditures.

An excerpt taken from “Routledge Handbook of Science, Technology, and Society” by Daniel Lee Kleinman and Kelly Moore.

An exemplary model: Enter POSCO
The Park administration realised the self-sufficiency in steel was vital to kickstart economic development in the 1960s. As such, the Pohang Iron and Steel Company Limited (POSCO) was formed in 1968 with Park Tae-Joon (박태준) at the helm. In 1973, POSCO began production. Notably, the state-owned PSCO was ranked the world’s six-largest steel producer in 1986, commanding an annual output of 11.3 million tonnes. With technical support from Nippon Steel, POSCO became one of South Korea’s most profitable enterprise.

The Korean steel industry became the catalyst and linchpin for a number of industries, such as automobiles, shipbuilding, containers, railroads, construction, and appliances, which complemented one another in a virtuous vicious circle of economic growth over the last three decades. POSCO and importance of the state development in economic development as one of the good and significant examples.

An excerpt taken from “Designing Public Procurement Policy in Developing Countries: How to Foster Technology Transfer and Industrialization in the Global Economy” by Murat A. Yülek and Travis K. Taylor.

Likewise, other private businesses contributed to the economic transformation of South Korea, such as Hyundai. These chaebols defined the economic development of South Korea.

What can we learn from this article?
Consider the following question:
– How far do you agree that the economic miracle in South Korea was result of Park Chung-hee’s leadership?

Join our JC History Tuition to learn more about the Global Economy and the Asian Tiger economies. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - Why did Nixon end the Bretton Woods system - Global Economy Notes

Why did Nixon end the Bretton Woods system?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Problems of economic liberalisation

Learn more about the historical significance of the Gold Standard [Video by Economics Explained].

Historical background
In 1944, an international monetary agreement was signed in 1944 at the Bretton Woods Conference. Under this agreement, foreign currencies were defined in terms of the US dollar (USD). A new system was established in the post-WWII period to replace the Gold Standard that ended in 1993 following the Great Depression.

Under this system, a fixed exchange rate was established, in which one ounce of gold is equivalent to 35 USD.

When nations participate in a pegged exchange-rate system, they agree to fix the value of their currencies relative to another currency rather than to a commodity such as gold. The US dollar was chosen as the base currency and all the countries agreed to keep the value of their currency within plus or minus 1 percent of a specific value of the dollar. […] In contrast to all other nations, the US currency maintained a relationship with gold fixed at $35/ounce. Thus, because the US dollar remained fixed to gold, this was an indirect gold standard, but nations used US dollars rather than gold to settle international transactions.

An excerpt taken from “International Business: Strategy and the Multinational Company” by K. Praveen Parboteeah and John B. Cullen.

With support from the International Monetary Fund (IMF), an automatic adjustment helped nations to avoid the onset of deflation, thereby maintaining stable exchange rates. By the late 1950s, key trading nations loosened exchange restrictions to accept the international gold standard.

Dollar shortage & the Gold Pool
Following the Second World War, governments in Western Europe imported US-made machinery and merchandise. Consequently, there was a surge in demand for USD, given that more nations underwent post-war economic reconstruction. During the Presidential polls in August 1960, US Senator John F. Kennedy declared his plan to “get America moving again“, giving rise to a ‘gold rush’.

As a result, the increase in market price of gold in London to $40 sparked fears of an unstable USD-gold parity. As such, a “Gold Pool” was created in November 1961, in which eight central banks agreed to buy and sell gold only at the official price of $35. Seven other central banks agreed to provide half of the gold supply to keep the market price of gold stable.

The spike in the London market price sparked fears that governments, seeing the writing on the wall, might demand wholesale conversion of their dollars into gold. In response, the US Treasury provided the Bank of England with gold to be used to bring the price of gold on the London gold market, where the metal was bought and sold by private investors (some would say “speculators”), back down to $35, and the governments of principal industrial countries agreed to refrain from buying gold at a higher price.

[…] What the left hand gave, the right hand taketh away, in other words, in a classic instance of a collective-action problem. As a result, the Gold Pool did little to resolve the internal contradictions of what was now referred to as the Bretton Woods gold-dollar system.

An excerpt taken from “The Bretton Woods Agreements: Together with Scholarly Commentaries and Essential Historical Documents” by Naomi Lamoreaux and Ian Shapiro.

Overvaluation of the USD: A currency crisis and a gold glut
However, the USA faced problems with the system. In the early 1960s, the USA experienced rising inflation. As a result of inflation, the increase in silver prices made it difficult for the USA to ensure adequate circulation of coins and silver certificates. In response, the Congress repealed the Silver Purchase Act in 1963 and enabled the Federal Reserve to produce notes in $1 and $2 denominations. At the same time, silver certificates were gradually retired, thus freeing up the silver holdings for use as coins.

Yet, inflation persisted. In 1968, the Congress repealed the requirement to hold gold reserves against Federal Reserve notes. This led to the collapse of the “Gold Pool”.

By the late 1960s, the inflationary condition exacerbated by the large spending to finance the ‘Great Society’ and the Vietnam War strained the international monetary system. Although a two-tier gold market was created in March 1968, foreign governments viewed it with much skepticism. Central banks were unwilling to accept USD in settlement.

The Bretton Woods was based on gold, but the global gold stock could not meet the world’s demand for international reserves, without which pegged exchange rates were impossible. Consequently, the United States provided dollar reserves by running a persistent balance of payments deficit and promised to redeem those dollars for gold at $35 per ounce. By 1961, however, the amount of dollar claims outstanding began to exceed the US government’s stock of gold. The deficit of gold implied that the United States might not be able to keep its pledge to convert dollars for gold at the official price.

[…] The prospect of a dollar devaluation created strong incentives to exchange dollars for US gold. The US Treasury and the Federal Reserve tried to keep this from happening through stop-gap measures, but they could not solve the underlying paradox: Without additional dollar reserves, the system was unworkable; with additional dollar reserves, the system was unstable.

An excerpt taken from “Currency Stability and a Country’s Prosperity: “Does a Mandatory Currency Stability Law Determine the Stability and or Prosperity of a Country?” by John E. Baiden.

As a result, US President Richard Nixon ‘closed the gold window‘ in August 1971, thereby disallowing foreign central banks from exchanging USD for the US Treasury’s gold. Notably, Nixon blamed other countries for their reluctance to share the military burden of the Cold War, which in turn contributed to the persistent balance of payments deficit.

What can we learn from this article?
Consider the following question:
– How far do you agree that the problems of the Crisis Decades were the result of American economic policies?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.

JC History Tuition Online - How did the Gulf states dominated the global oil market - Global Economy Notes

How did the Gulf states dominate the global oil market?

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Topic of Study [For H2 History Students]: 
Paper 1: Understanding the Global Economy (1945-2000)
Section B: Essay Writing
Theme II Chapter 1: Reasons for growth of the global economy; Chapter 2: Reasons for problems of the global economy 

How will the future of petrostates in the Persian Gulf be? Find out more. [Video by Al Jazeera English]

The value of ‘Black Gold’: Oil
As the Allied powers concluded the Second World War (WWII) with the help of the USA, the latter recognised the strategic and economic value of oil, given its relevance to enable the continuation of war efforts then.

After the Yalta Conference, US President Franklin Roosevelt met the Saudi King Abdel Aziz on the cruiser USS Quincy on 14 February 1945. The Saudi King agreed to let the USA carry out port visits and build an airfield. At the same time, concession was given to the oil production by the Saudi-American Oil Company (Aramco). Notably, this collaborative relationship continued after WWII.

Since then, a special relationship between the two countries has evolved, due not only to mutual interest in reliable supplies of oil flowing to the West but also to their close cooperation in Middle East regional security. During the Cold War, Saudi Arabia considered atheistic Soviet Communist ideology to be the greatest threat to Muslim hearts and minds. Thus, the kingdom also opposed radical Arab leaders such as President Gamal Abdel Nasser of Egypt, who established cordial relations with the Soviet Union.

An excerpt taken from “Government and Politics of the Middle East and North Africa: Development, Democracy, and Dictatorship” by Mark Gasiorowski and Sean Yom.

During the Cold War, the USA rose to prominence by acting as a security guarantor for the six Arab states in the Persian Gulf (Bahrain, Oman, Qatar, Kuwait, Saudi Arabia and the United Arab Emirates). Having a reliable access to oil supply was vital in facilitating post-war economic reconstruction. As such, the USA was a key importer of oil, thereby keeping the Middle Eastern powers relevant.

US interest in the Gulf was also a by-product of the postwar economy in the developed world. Postwar reconstruction, a growing western consumer power, and the mass hydrocarbons at the centre of the world’s wealthier economies, and created an explosion in demand, with the unsurprising result that ensuring secure and reliable access to oil supplies became a central pillar of US and western foreign policies. […] From that time, the sheer size and quality of the Middle East’s reserves meant that the region could probably never have avoided becoming entangled in international politics as it did during and after the Cold War.

An excerpt taken from “The Economy of the Gulf States” by Matthew Gray.

Jockeying for position: Claiming ownership rights and petrodollars
Before the Organisation of Petroleum Exporting Countries (OPEC) was formed in 1960, the “Seven Sisters” dominated the global oil industry. In 1908, the British discovered oil in western Persia (which later came to be known as Iran). Six years later, the Anglo-Persian Oil Company (APOC) was formed, with the British holding 51% stake in it.

In the 1950s, in line with developments in the international oil business, companies were compelled to shift to 50:50 profit-sharing agreements. For the first time, oil revenues were truly substantial: the Bahraini ruler received oil revenues of about £2.5 million in the mid-1950s. In Kuwait, the 50:50 agreement of 1950 generated £60 million from the Al Sabah in the mid-1950s, while the Qatari rulers received about £5 million per year. The Saudi oil income reached about £20 million in 1950, but rose faster than that of any other country in the region.

An excerpt taken from “The Emergence of the Gulf States: Studies in Modern History” by John Peterson.

Initially, the OPEC was formed as a result of the Baghdad Conference of September 1960 to ensure stable oil prices in the markets. However, as its membership size grew (15 in the 1970s), the organisation began to challenge the “Seven Sisters”.

In 1968, the regional group similar to OPEC, known as the Organisation of Arab Petroleum Exporting Countries (OAPEC) was formed. Its rising dominance in the oil markets was made known when an oil embargo was imposed against the USA during the Yom Kippur War, thus triggering the Energy Crisis of the 1970s.

What can we learn from this article?
Consider the following question:
– How far do you agree that oil was the most important factor that shaped the global economy in the 20th century?

Join our JC History Tuition to learn more about the Global Economy. The H2 and H1 History Tuition feature online discussion and writing practices to enhance your knowledge application skills. Get useful study notes and clarify your doubts on the subject with the tutor. You can also follow our Telegram Channel to get useful updates.

We have other JC tuition classes, such as JC Math Tuition. For Secondary Tuition, we provide Secondary English Tuition, Secondary Math tuition, Secondary Chemistry Tuition, Social Studies Tuition, Geography, History Tuition and Secondary Economics Tuition. For Primary Tuition, we have Primary English, Math and Science Tuition. Call 9658 5789 to find out more.