JC History Tuition Online - What is POSCO in South Korea

What is POSCO in South Korea?

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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] 

Learn more about the world-renowned steelmaker POSCO [Video by Arirang News]

The steel industry in South Korea: A historical background
In the 1960s, the steel industry in South Korea was largely absent. Three decades later, Korea became the world’s sixth-largest steel producing country. This development can be explained by General Park Chung-hee’s aim for Korea to be self-sufficient in steel production.

Steel has been commonly known as the ‘staple of industry‘, in which this versatile metal is highly applicable in many basic industries, such as shipbuilding, construction, machinery and automotive. Hence, its complementary nature further underpinned South Korea’s economic success.

Enter Park Tae-Joon
In 1967, the Korean government picked Pohang as the location for the construction of the first integrated steelworks. The Korea Tungsten Company was selected as the end-user of the integrated steelworks. The president of the Korea Tungsten Company was Park Tae-Joon.

Park Tae-Jun was known for prioritizing “speedy operations.” Under his direction, the construction of POSCO in the early years were completed well ahead of schedule which not only saved time but millions of dollars (Seo 2011). This was even more extraordinary considering that the construction site was formerly a barren sand field that lacked any related and supporting infrastructure.

[…] CEO Park was also well known for his diligence and dedication. Park believed that the best way to lift his employees’ total commitment to work was for him to set a good example. Park spent most of his time on site with the workers while the first steel plant was being completed. He promptly abandoned all leisure activities and hobbies to focus on the plant construction. Park’s diligence had a marked impact on all of POSCO employees, who were motivated to follow the footsteps of their CEO.

An excerpt taken from “Strategy for Korea’s Economic Success” by Hwy-Chang Moon.

Park Tae-Joon was then appointed to helm the newly-formed Pohang Iron and Steel Company (POSCO) on 1 April 1968. However, POSCO’s developments were not entirely smooth-sailing from the start.

Although the Korean President Park Chung-hee engaged foreign steel companies to form the Korea International Steel Associates (KISA) in 1966, the POSCO leader received confirmation that the securing of loans from KISA was not possible. In response, Park Tae-Joon capitalised on his extensive networks in Japan to find a solution.

In December 1969, the “Korea-Japan Framework Agreement” was signed, granting POSCO the right to sign a technology service contract with Japan Group. Japan Group comprised of three companies (Yawata Steel Works, Nippon-Kokan KK and Fuji Steel Corporation) that offered their technological expertise to facilitate the construction and operation of integrated steelworks in South Korea.

Korea’s economic rise in the 1970s
On 1 April 1970, POSCO launched Phase 1 of its comprehensive construction of the Pohang steelworks at Yeongilman Bay. POSCO’s objectives were aligned with the Korean government’s, in which General Park later put forth the Heavy and Chemical Industrialisation (HCI) Plan in 1973.

Creating domestic capabilities for steel production was a vital step for sustainable economic development, given the changes to American foreign policy in Asia by the early 1970s. The diminished American military presence in Indochina and parts of East Asia made General Park Chung-hee more certain that the formulation of a HCI Plan was the right step to take.

The deteriorating condition of military security put the HCI drive on a qualitatively different plane as well. With President Nixon’s visit to China in 1972, the U.S. Seventh Infantry Division’s withdrawal from South Korea in 1971, and the U.S. military disengagement from South Vietnam in 1972, Park’s urgency in developing the steel industry as part of South Korea’s modern defense industries rose dramatically.

[…] The launching of HCI profoundly strengthened the status of the steel industry within the hierarchy of the national agendas. Park looked at the steel industry as the engine of deepening industrial development. This change of perception within the inner policy circles led to the announcement in July 1973 of plans to construct a second integrated steel mill upon the completion of POSCO. To support the simultaneous development of the shipbuilding, electronics, machinery, and nonmetal materials industries, Park called for increasing the South Korean steel production capacity from one million tons in 1973 to ten million by 1980.

An excerpt taken from “The Park Chung Hee Era: The Transformation of South Korea” by Byung-Kook Kim and Ezra F. Vogel.

What can we learn from this article?
Consider the following question:
– How far do you agree that the economic transformation of South Korea between 1970 and 1990 was the result of business conglomerates?

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

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 dominate the global oil market

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.