Culture Focus
Korea in the World
Economic Growth
Since its liberation from Japanese occupation in August 1945, Korea has achieved rapid economic growth after overcoming a great many difficulties. In order to briefly introduce the reader to this process, it is best to divide this period into three stages. The first stage of “reconstruction” was in the 1950s after the Korean War, when the nation began restoring its war-stricken lands and dilapidated industrial facilities by relying on foreign assistance. The second “take-off” stage was in the 1960s and 1970s, a time when the nation started to industrialize in earnest. The third stage can be subdivided into two parts: 1) the 1980s, when the nation promoted economic liberalization and autonomy and 2) the 1990s and the 2000s, when the nation overcame a series of economic crises and actively pushed for globalization.
During the first stage, South Korea was one of the most impoverished nations in the world, as its industries and infrastructure had collapsed during the Korean War. Koreans had to rely on foreign assistance from the United States and the United Nations.
By utilizing foreign assistance, the Rhee Syngman government carried out a policy of import substitution industrialization in order to promote economic revitalization and self-reliance. Import substitution industrialization is a trade and economic policy which advocates replacing foreign imports with domestic production in order to promote the local production of industrialized items and to help reduce the outflow of foreign currency. Thanks to this policy, the 1950s saw the development of the milling and sugar-refining industries and the cotton textile industry, which received raw materials in assistance from the United States. Import substitution industrialization was a typical development model for underdeveloped nations; South Korea was not an exception. The Rhee Syngman government was also highly interested in promoting exports in order to overcome the nation’s adverse balance of payments. However, it could not find solutions for this unfavorable situation.
The second stage of economic development was carried out during the reign of President Park Chung-hee from the mid-1960s to the 1970s. Between 1963 and 1979, the nation recorded an annual economic growth of more than eight percent. Foreigners who saw the rapid economic development of this previously impoverished nation coined the expression “the Miracle on the Hangang River,” a term reminiscent of West Germany’s “Miracle on the Rhine.” Some of the main factors for the achievement of this brilliant growth were as follows: the government’s exportfirst and investment promotion policies, external conditions favorable to the nation’s growth, and abundant human resources.
First of all, in 1963 the government began to put top priority on expanding exports for the acquisition of foreign currencies as a way of overcoming a crisis resulting from a lack of foreign exchange reserves. After domestic enterprises showed that they excelled at exports, the government adopted strong export-oriented industrialization strategies from the mid-1960s. The government held “expanded” meetings every month for the promotion of exports between 1965 and 1979 and endeavored to expand overseas markets and establish policies to support exports. They used the expression “expanded” because not only were officials from the related government ministries participating, but also businessmen and academic experts. President Park himself presided over these monthly expanded meetings.
In 1964, much earlier than first expected, South Korea saw annual exports of US$100 million, followed by US$1 billion in 1970 and US$10 billion in 1977, thus creating a “myth of exports.” The nation’s exports rose further to US$100 billion in 1995 and US$500 billion in 2011. In terms of trade value of both exports and imports, the figure amounted to more than US$1 trillion, raising the nation’s ranking to ninth in the world.
During the first stage, South Korea was one of the most impoverished nations in the world, as its industries and infrastructure had collapsed during the Korean War. Koreans had to rely on foreign assistance from the United States and the United Nations.
By utilizing foreign assistance, the Rhee Syngman government carried out a policy of import substitution industrialization in order to promote economic revitalization and self-reliance. Import substitution industrialization is a trade and economic policy which advocates replacing foreign imports with domestic production in order to promote the local production of industrialized items and to help reduce the outflow of foreign currency. Thanks to this policy, the 1950s saw the development of the milling and sugar-refining industries and the cotton textile industry, which received raw materials in assistance from the United States. Import substitution industrialization was a typical development model for underdeveloped nations; South Korea was not an exception. The Rhee Syngman government was also highly interested in promoting exports in order to overcome the nation’s adverse balance of payments. However, it could not find solutions for this unfavorable situation.
The second stage of economic development was carried out during the reign of President Park Chung-hee from the mid-1960s to the 1970s. Between 1963 and 1979, the nation recorded an annual economic growth of more than eight percent. Foreigners who saw the rapid economic development of this previously impoverished nation coined the expression “the Miracle on the Hangang River,” a term reminiscent of West Germany’s “Miracle on the Rhine.” Some of the main factors for the achievement of this brilliant growth were as follows: the government’s exportfirst and investment promotion policies, external conditions favorable to the nation’s growth, and abundant human resources.
First of all, in 1963 the government began to put top priority on expanding exports for the acquisition of foreign currencies as a way of overcoming a crisis resulting from a lack of foreign exchange reserves. After domestic enterprises showed that they excelled at exports, the government adopted strong export-oriented industrialization strategies from the mid-1960s. The government held “expanded” meetings every month for the promotion of exports between 1965 and 1979 and endeavored to expand overseas markets and establish policies to support exports. They used the expression “expanded” because not only were officials from the related government ministries participating, but also businessmen and academic experts. President Park himself presided over these monthly expanded meetings.
In 1964, much earlier than first expected, South Korea saw annual exports of US$100 million, followed by US$1 billion in 1970 and US$10 billion in 1977, thus creating a “myth of exports.” The nation’s exports rose further to US$100 billion in 1995 and US$500 billion in 2011. In terms of trade value of both exports and imports, the figure amounted to more than US$1 trillion, raising the nation’s ranking to ninth in the world.
The rapid increase in exports was attributed to the South Korean government’s ongoing efforts for trade promotion. South Korea participated in multilateral free trade by joining the General Agreement on Tariffs and Trade (GATT) in 1967 and becoming a member country of the World Trade Organization (WTO) in 1994. The nation first signed free trade agreements (FTA) with Chile in 2004, followed by Singapore and EFTA (2006); ASEAN (2007); India (2010); the EU and Peru (2011); the United States (2012); Turkey (2013); Australia (2014); Canada, China, New Zealand, and Vietnam (2015); and Colombia (2016). It is noteworthy that South Korea is the only nation in the world that has concluded an FTA with the three biggest global markets: North America, Europe, and China. It is not possible to explain the history of South Korea’s economic growth without mentioning “trade” and “openness.”
The second biggest factor in the nation’s impressive growth rate was investment, since a higher rate of investment could help facilitate development. The accomplishment of a high rate of investment was possible thanks to a higher rate of savings. Moreover, a higher rate of investment could be maintained for a longer period when bolstered by foreign loans and investments from overseas. Thanks to these investments, from 1962 the government was able to carry out its Five-Year Economic Development Plans for decades and map out projects that invested heavily in core industrial sectors.
This continuous level of investment provided South Korean businesses with the capital necessary for the purchase of machinery, equipping facilities for the production of high value-added goods, and improving their technological competitiveness through research and development (R&D). In particular, the government’s large-scale investment in the heavy chemical industry in the 1970s allowed Korea to move beyond light industry–oriented development and secure a global standard in its technological capabilities in that industry. As a result, the nation’s shipbuilding, automobile, steel, petrochemical, electronics, machinery, and construction sectors achieved high added value and were established as the nation’s representative industries.
The third factor in the growth of the Korean economy was the global conditions favorable to South Korea between the 1960s and the 1970s. As mentioned previously, since the 1950s South Korea had received military and economic assistance from the United States based on its special status of being divided into the South and the North after the Korea War under the order of the Cold War. Although the amount of assistance gradually decreased, the international community continued to provide the nation with a great number of opportunities after the 1960s. Strictly speaking, the productivity of South Korea accounted for some 15 percent of its US counterpart in the 1970s. However, it registered more rapid economic growth than South America, whose productivity was more than 30 percent of the US, because South Korea had access to many low-end US markets. As of 1971, exports to the United States and Japan accounted for more than 75 percent of the nation’s total exports. Also, in the 1970s Korean companies made inroads in the Middle East construction market, earning foreign currency to improve the international balance and increase the national income. Moreover, in the late 1960s and 1970s, as developed countries transitioned to high-tech industries, their heavy and chemical industries began to decline; Korea could then enter and grow in these sectors.
The fourth factor for the growth of the Korean economy was its abundant human resources. When the nation started to industrialize in the 1960s it had a large labor force and the number of laborers continued to grow. After the government adopted a mandatory elementary school education system in the 1950s (under the catchphrase of “building the nation through education”) to address the importance placed on education by the public, the nation was equipped with an impressive number of educated workers. From the 1960s, the government established vocational high schools and technical colleges in order to cultivate skilled technicians. At the same time, there was an increase in the number of college graduates who became office workers and business managers. The workers, employed in all sectors of the nation’s industries, devoted themselves to their work and contributed greatly to the nation’s economic growth. Alongside these developments, many research institutes and colleges, including the Korea Institute of Science and Technology (KIST) and the Korea Advanced Institute of Science and Technology (KAIST), helped promote the continuous growth of the nation by developing source technologies through research and by cultivating the skilled manpower required for various industries.
The second biggest factor in the nation’s impressive growth rate was investment, since a higher rate of investment could help facilitate development. The accomplishment of a high rate of investment was possible thanks to a higher rate of savings. Moreover, a higher rate of investment could be maintained for a longer period when bolstered by foreign loans and investments from overseas. Thanks to these investments, from 1962 the government was able to carry out its Five-Year Economic Development Plans for decades and map out projects that invested heavily in core industrial sectors.
This continuous level of investment provided South Korean businesses with the capital necessary for the purchase of machinery, equipping facilities for the production of high value-added goods, and improving their technological competitiveness through research and development (R&D). In particular, the government’s large-scale investment in the heavy chemical industry in the 1970s allowed Korea to move beyond light industry–oriented development and secure a global standard in its technological capabilities in that industry. As a result, the nation’s shipbuilding, automobile, steel, petrochemical, electronics, machinery, and construction sectors achieved high added value and were established as the nation’s representative industries.
The third factor in the growth of the Korean economy was the global conditions favorable to South Korea between the 1960s and the 1970s. As mentioned previously, since the 1950s South Korea had received military and economic assistance from the United States based on its special status of being divided into the South and the North after the Korea War under the order of the Cold War. Although the amount of assistance gradually decreased, the international community continued to provide the nation with a great number of opportunities after the 1960s. Strictly speaking, the productivity of South Korea accounted for some 15 percent of its US counterpart in the 1970s. However, it registered more rapid economic growth than South America, whose productivity was more than 30 percent of the US, because South Korea had access to many low-end US markets. As of 1971, exports to the United States and Japan accounted for more than 75 percent of the nation’s total exports. Also, in the 1970s Korean companies made inroads in the Middle East construction market, earning foreign currency to improve the international balance and increase the national income. Moreover, in the late 1960s and 1970s, as developed countries transitioned to high-tech industries, their heavy and chemical industries began to decline; Korea could then enter and grow in these sectors.
The fourth factor for the growth of the Korean economy was its abundant human resources. When the nation started to industrialize in the 1960s it had a large labor force and the number of laborers continued to grow. After the government adopted a mandatory elementary school education system in the 1950s (under the catchphrase of “building the nation through education”) to address the importance placed on education by the public, the nation was equipped with an impressive number of educated workers. From the 1960s, the government established vocational high schools and technical colleges in order to cultivate skilled technicians. At the same time, there was an increase in the number of college graduates who became office workers and business managers. The workers, employed in all sectors of the nation’s industries, devoted themselves to their work and contributed greatly to the nation’s economic growth. Alongside these developments, many research institutes and colleges, including the Korea Institute of Science and Technology (KIST) and the Korea Advanced Institute of Science and Technology (KAIST), helped promote the continuous growth of the nation by developing source technologies through research and by cultivating the skilled manpower required for various industries.
Thanks to the four factors mentioned above, the nation’s industrial structure experienced tremendous change. Looking at the long-term trend of the share of each industry relative to GDP, the proportion of agriculture, forestry, and fisheries reached 50 percent in the 1950s but then fell to 15 percent in 1980 and to 2.5 percent today. On the other hand, the mining and manufacturing industries were less than 10 percent in the early 1950s, but have continued to increase since the 1960s and have remained at around 30 percent since 1980. In addition, the share of social overhead capital and the service industry increased from 40 percent in the 1950s to about 60 percent from 1980.
During the second development period, the nation saw rapid economic growth and the enhancement of the living conditions of ordinary Koreans. However, the gap between the rich and the poor widened and social disparities increased. The Park Chung-hee government stepped up its oppression of society and the public under the pretext of promoting the heavy chemical sector and the defense-related industry. The government had to let domestic businesses lower their production costs in order to maintain continuous economic growth and facilitate exports, thus preventing wage increases. As a result, laborers worked for longer hours at lower rates of pay. The working conditions for blue-collar workers were especially poor, placing them at a financial disadvantage. Some workers struggled to improve their working conditions, but their labor movements were restricted by law.
It was only in the mid-1980s that the nation saw an increase in the number of labor unions, and it was not until 1987, when the military dictatorship was coming to an end, that labor movements rose up in earnest. Thanks to their activism, labor-management dialogue and agreements, and the government’s efforts at mediation the workers subsequently saw improvements in their labor conditions and the promotion of their rights. The development of democracy in Korean society, including the vitalization of labor movements, was pointed out as a major factor that widened the economic gap between South Korea and North Korea. The heated call for democratization of the nation helped strengthen the anti-corruption surveillance system and the reformminded mechanisms among the public, which eventually contributed greatly to the effective utilization of human resources in society.
The third stage refers to the period between the 1980s and the present day. From its launch in 1981, the Chun Doo-hwan government shifted its economic policy from a growth-oriented scheme to a stability-centered one. The government initiated the restructuring of the heavy chemical industry sector and carried out industrial rationalization in order to cope with the economic crisis of the late 1970s. In the process of the rationalization of the industry, the government promoted the development of small- and medium-size companies and as a result saw an increase in the number of manufacturing companies that produced parts and components, as well as intermediary goods. This also facilitated inter-industry connections between small- and medium-size companies and large conglomerates. The plan for industrial rationalization was unable to achieve the desired result in some industrial sectors due to strong opposition from related enterprises. This indicated that the government’s industrial policy would not be successful without voluntary cooperation from businesses.
During the second development period, the nation saw rapid economic growth and the enhancement of the living conditions of ordinary Koreans. However, the gap between the rich and the poor widened and social disparities increased. The Park Chung-hee government stepped up its oppression of society and the public under the pretext of promoting the heavy chemical sector and the defense-related industry. The government had to let domestic businesses lower their production costs in order to maintain continuous economic growth and facilitate exports, thus preventing wage increases. As a result, laborers worked for longer hours at lower rates of pay. The working conditions for blue-collar workers were especially poor, placing them at a financial disadvantage. Some workers struggled to improve their working conditions, but their labor movements were restricted by law.
It was only in the mid-1980s that the nation saw an increase in the number of labor unions, and it was not until 1987, when the military dictatorship was coming to an end, that labor movements rose up in earnest. Thanks to their activism, labor-management dialogue and agreements, and the government’s efforts at mediation the workers subsequently saw improvements in their labor conditions and the promotion of their rights. The development of democracy in Korean society, including the vitalization of labor movements, was pointed out as a major factor that widened the economic gap between South Korea and North Korea. The heated call for democratization of the nation helped strengthen the anti-corruption surveillance system and the reformminded mechanisms among the public, which eventually contributed greatly to the effective utilization of human resources in society.
The third stage refers to the period between the 1980s and the present day. From its launch in 1981, the Chun Doo-hwan government shifted its economic policy from a growth-oriented scheme to a stability-centered one. The government initiated the restructuring of the heavy chemical industry sector and carried out industrial rationalization in order to cope with the economic crisis of the late 1970s. In the process of the rationalization of the industry, the government promoted the development of small- and medium-size companies and as a result saw an increase in the number of manufacturing companies that produced parts and components, as well as intermediary goods. This also facilitated inter-industry connections between small- and medium-size companies and large conglomerates. The plan for industrial rationalization was unable to achieve the desired result in some industrial sectors due to strong opposition from related enterprises. This indicated that the government’s industrial policy would not be successful without voluntary cooperation from businesses.
Korea in the World
It is not easy to understand a foreign country in a short time. is a brief introduction of Korea for educators unfamiliar to Korea. The booklet collects and summarizes significant historical, cultural, and politico-economical traces of Korea. An essential material for educators who want to bring Korea in the textbook and to classroom.
It is not easy to understand a foreign country in a short time.
