How did South Korea grow so fast?
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]
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:
- 1954-1960: Import-substitution industrialisation
- 1961-1979: Export-oriented industrialisation
- 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?
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