SOUTH KOREAN ECONOMIC MIRACLE
In the first three decades after the Park Chung Hee government launched the First Five-Year Economic Development Plan in 1962, the South Korean economy grew enormously and the economic structure was radically transformed. In 1962 the per capita gross domestic product (GDP) was US$87. It grew to US$1,709 in 1983 and US$4,830 in 1989. By 1996 it reached US$10,543. In 2003, it was US$15,090. South Korea's real gross GDP expanded by an average of more than 8 percent per year, from US$2.3 billion in 1962 to US$204 billion in 1989. The manufacturing sector grew from 14.3 percent of GDP in 1962 to 30.3 percent in 1987. Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The ratio of domestic savings to GNP grew from 3.3 percent in 1962 to 35.8 percent in 1989. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990 *]
South Korea adopted a policy of economic modernization, emphasizing export-oriented industrialization and growth. Growth rates exceeded the goals of the five-year economic plans. According to the “Worldmark Encyclopedia of Nations”: South Korean “has a market economy in which both private enterprise and foreign investors play an important role. From 1962 to 1997, overall economic development was guided by the Economic Planning Board and a series of five-year plans. The Korean economy was devastated by the Korean War, even requiring foreign food aid. As late as 1965, per capita income was only $88 a year. Since 1965, South Korea has been transformed from an underdeveloped agricultural economy to a leading newly industrialized country (NIC) to a leader in the new information technology (IT) economy. Nominal GDP was $3 billion in 1965; in 2003, it was projected at $514 billion, 171 times higher. In 2004, South Korea joined the trillion-dollar club of world economies. [Source: Worldmark Encyclopedia of Nations, Thomson Gale, 2007]
According to “Governments of the World”: “The story of South Korea's economic rise from desperate poverty to relative prosperity has been the subject of extensive press coverage and analysis as well as intense scholarly debate. Although no consensus exists, this much is clear: South Korea's economic rise began in the 1960s after the military coup. From 1945 to 1961, South Korea was one of the poorest countries on earth. Income equality, as measured by the United Nation's Gini Index, is relatively high in South Korea, at 0.31 (which is better than all Asian countries except Japan and substantially better than that of the United States). According to the United Nations Development Program, moreover, South Korea's level of "human development" is considered high and is comparable to the most economically prosperous countries in world. [Source: “Governments of the World: A Global Guide to Citizens’ Rights and Responsibilities”, Thomson Gale, 2006]
Economy under Park Chung Hee
Park Chung Hee (1917-1979) was South Korea's most enduring leader. He ruled the country for 18 years (1963-79) and economically anyway was the right man at the right time for South Korea. He decided that South Korea could prosper on a policy of export-driven growth with heavy investment in technological-intensive industries such as shipbuilding, steel, petrochemicals and electronics. Within weeks after taking office he established a government body to provide direction for the economy.
When Park Chung-hee became the leader of South Korea in 1961, the country was among the poorest in Asia. Per Capita income was only US$100. It suffered from rising unemployment decreasing growth and dwindling U.S. aid. Many houses at that time then had no electricity, running water or bath tubs. People rarely ate meat and few could afford sewing machines, shoes, bicycles or tractors. People walked around in cold weather with rice straw wrapped around their feet for warmth. In some places women were only rarely allowed to leave the house and those that did wore veils like Muslim women.
Park normalized ties with Japan and built expressways and industrial complexes. Successive five-year economic development plans, first launched in 1962, brought dramatic changes. Between 1962 and 1972 manufacturing was established as a leading economic sector and exports increased dramatically. Exports grew from US$100 million in 1965 to US$10 billion in 1977.
With good salaries Park recruited the best and brightest into the government and they planned the countries development. Park once said a "a fire burns inside me." He was famous for his 18-hour work days and "vise-like" handshake. The economy seemed to follow his example. During the Park era, the South Korean economy grew in some years at the phenomenal rate of 14 percent, with exports increasing by as much as 40 percent annually. Under what became known as Korean capitalism, the Korean labor force worked hard under harsh conditions for little money.
Rapid Development Under Park Chung Hee
After taking office Park laid out a five year plan and put knowledgeable and able economists in charge. Under a kind of centrally-planned capitalism, the government decided which companies would produce what products and provided investment money in the form of low interest-loans. The government often made decision about pricing, wages and machinery purchases.
Realizing that foreign investment was key to growth, Park took the critical but highly unpopular step of normalizing ties with Japan, which led to an infusion of US$800 million in economic aid ( a lot of money at the time). The move prompted huge demonstrations in Seoul and Park reacted by imposing martial law. In 1965, he agreed to send troops to Vietnam to help the Americans fighting there. This was generously rewarded with more economic aid and military contracts. Revenues from the Vietnam War were th single largest source of foreign exchange in South Korea and this money laid the cornerstone for growth that would continues almost unabated for three decades.
Technology and expertise from Japan and money from the United States and Japan helped jump start South Korea's economic boom. The goals of Park Chung Hee’s five year plans were often exceeded. Park rewarded companies that built bridges, buildings and roads ahead of schedule and ordinary Koreans pitched in by developing a “hurry up” culture.
Textiles was the first industry to develop. During the period of economic expansion in the 1960s and 70s, many factories hired country girls, who lived in dormitories and worked for low wages. Howard Sochurek visited one factory that turned human hair bought from India and Indonesia into wigs. The hair arrived in large bags and the girls sorted it according to length and texture and then dyed, washed, and combed it. The most expensive wigs were hand sewn, while most were stitched by machine. Between 1964 and 1969 the money earned from exporting wigs jumped from US$100,000 to US$28,000,000. Most of the wigs, which cost US$9 to make and sold for US$50, ended up in the United States. [Source: Howard Sochurek, National Geographic March 1969]
Over time higher-tech manufacturing took hold in South Korea. In the 1980s, South Korea was leading manufacture of sports shoes and cheap textiles. These products are now made in China, Thailand and Indonesia while South Korea now manufactures semiconductors and other high tech products. Textiles and clothing accounted for about a third of exports in 1980 but only a eighth in 1995. Office machines and telecommunications equipment accounted for about 10 percent of exports in 1980 but 40 percent in 1995.
"Economic Miracle" Under Park Chung Hee
Donald N. Clark wrote in “Culture and Customs of Korea”: “Park created a central Economic Planning Board (EPB) and used his power to open doors to foreign money, borrowing capital and negotiating for aid from the United States and Japan. Beginning with this, the EPB mapped out a series of five-year plans that set ambitious targets for production. Using the slogan "Production, Exports, Construction!" the government made the Korean economy produce goods that could be sold abroad, earning foreign exchange that could be used to buy imported raw materials, machines, and advanced equipment for further production. The Park government also sent Korean workers abroad to Europe and the Middle East to earn money in places where labor was scarce. In the 1960s Korean troops also fought in Vietnam,their expenses being paid by the United States. [Source: “Culture and Customs of Korea” by Donald N. Clark, Greenwood Press, 2000]
“These multiple sources of revenue from outside Korea "primed the pump" of the Korean economy and made it possible to exceed the Five Year Plan targets time after time. The government also stressed rural development through a program called the "New Community Movement." Aimed at increasing agricultural productivity and raising the standard of living in the countryside, the New Community Movement made credit available to farmers, supplied them with seed, fertilizers, and pesticides, installed electricity and safe water, promoted public health, paved roads, built schools, and improved transportation and communications. These improvements, together with the trend toward urbanization, dramatically increased per capita production in the provinces and narrowed the gap in living standards between Koreans who lived in the cities and rural villages.
“The enormous sacrifices required to accomplish these things were not evenly distributed despite the government's best efforts. Many Koreans suffered under brutal working conditions. The rate of injuries and accidents among those who did "3-D" kinds of work (difficult, dirty, and dangerous), workers such as miners and those who worked in urban sweatshops, was very high. One type of worker was especially exploited: the teenage girls fresh from middle school whose good health and quick reflexes made them excellent factory hands. These girls normally worked long hours for low pay and often were expected to send their wages home to their families, sometimes to finance their brothers' educations, until they quit work to get married. Korean workers were discouraged from organizing unions or engaging in any kind of collective bargaining. Indeed, their low wages were a key to South Korea's economic progress.
“On the other hand, the Park government tried to engineer the success of Korea's biggest companies by having government-controlled banks make them government-guaranteed loans. These companies quickly became conglomerates called chaebol, which were made up of families of companies. The Hyundai chaebol, for example, included automobile, construction, shipbuilding, and retailing components. Samsung, which started out in textiles, developed an electronics manufacturing specialty that became known around the world, first for televisions and microwave ovens, and then for semiconductors and other high-tech computer components. Demand for Korean products overseas helped free Korea from foreign aid and then enriched the chaebol, enabling them to buy up smaller companies and grow big enough to control a significant part of the national economy. When workers saw the wealth that was accumulating in the chaebol they demanded higher wages. The Park government, however, resisted any loosening of control over the workforce. It argued that worker unrest was a threat to national security that would destabilize the country and invite intervention by Communist North Korea.”
Economic Policies Under Park Chung Hee That Encouraged Growth
South Korea's economy grew rapidly under Park. The military leaders, with little previous political or administrative experience, and lacking a developmental program, later turned to the economists and planners for assistance. The Economic Planning Board was established in 1961. A program of rapid industrialization based on exports was launched. The shift in orientation was reflected in the First Five-Year Economic Development Plan (1962-66), and the subsequent second (1967-71), third (1972-76), and fourth (1977-81) five-year economic development plans.*
Park's policies encouraged private entrepreneurs. Businesses were given powerful incentives to export, including preferential treatment in obtaining low-interest bank loans, import privileges, permission to borrow from foreign sources, and tax benefits. Some of these businesses later became the chaebol.*
Toward these ends, the currency was drastically devalued in 1961 and 1964 and import quotas for raw materials eased. Private saving was encouraged by raising interest rates and funds were borrowed from abroad. Exports also were encouraged by direct subsidies; all taxes and restrictions on the import of intermediate goods that were to be used to produce export products were removed. As the existing industries — textiles, clothing, and electrical machinery, among others — had been stagnant owing to a lack of imported raw materials, these policies produced immediate results.*
These developmental programs required enormous amounts of capital. As the level of United States assistance had stabilized, the Park regime turned to "financial diplomacy" with other countries. The normalization of relations with Japan in 1965 brought Japanese funds in the form of loans and compensation for the damages suffered during the colonial era. Park made a state visit to the Federal Republic of Germany in 1964 that resulted in the extension of government aid and commercial credits. The availability of funds and the increasing level of exports elevated Seoul's credit rating, making it possible to increase borrowing in the open international market. Further, the conflict in Indochina stimulated economic growth. Seoul's export drive also owed much to the availability of an educated labor force and a favorable international market.*
South Korean businesses discovered that they could successfully compete abroad. As idle capacity was used up and the demand for new manufacturing investment rose, increasing numbers of foreign investors were attracted to South Korea.*
Foreign exchange earnings improved as export and foreign receipts rose. The government also took steps to increase tax revenues and stabilize consumer prices. Much of the price stabilization program was carried out at the expense of farmers, who were forced to accept the government's policy of low grain prices. Agricultural development lagged behind until 1971, when the government shifted to a policy of high grain prices and inaugurated the Saemaul undong (New Community) Movement aimed at improving the farm village environment and increasing agricultural production and income.*
Official statistics indicated rapid economic growth. Substantial successes were achieved under the first two five-year economic development plans. The manufacturing sector provided the main stimulus, growing by 15 percent and 21 percent, respectively, during the two plans. Domestic savings rates grew and exports expanded significantly. A new economic strategy emphasizing diversification in production and trade proved generally successful in the 1970s. Under the third plan, the government made a bold move to expand South Korea's heavy and chemical industries, investing in steel, machinery, shipbuilding, electronics, chemicals, and nonferrous metals. South Korea's capability for steel production and oil refining rose most notably. Refineries for zinc and copper and modern shipbuilding facilities were constructed; automobiles began to be exported to a few markets. The plan sought to better prepare South Korea for competition in the world market and to facilitate domestic production of weaponry.*
Chaebols Under Park Chung Hee
Chaebols (large industrial conglomerates) dominate the South Korean economy today and played a big part in the country’s economic growth. Hyundai, Samsung and LG are among the most well known chaebols today. Chaebols are huge operations that combine finance, research and manufacturing. The largest chaebols have between dozens of affiliates and em[loy hundreds and thousands of people. They are a big as many national economies.
The Park Chung Hee government protected the chaebols from high labor costs, foreign competition, and even "excessive" domestic competition. The government also bailed out troubled chaebols by supplying money or transferring assets to another chaebol.
Guaranteed government assistance, the chaebols leaped into a plethora of industries in which they had little experience. This is how the chaebols developed into huge conglomerates with divisions in industries as diverse as construction, chemicals, electronics, cars, newspapers, shipbuilding and cars. With such strong bonds between government and industry, payoffs and bribes became an accepted part of doing business in Korea.
The Park government was plagued by corruption. His cozy relationship with the chaebols helped push the economy forward but it also created a business culture, greased by corruption, that endured long after he was gone and was partly blamed on South Korea's economic troubles in the late 1990s. One of Parks's biggest supporters was the Reverend Sun Myung Moon.
The chaebol were often compared with Japanese keiretsu (the successor of the zaibatsu), but as David I. Steinberg has noted, there were at least three major differences. First, the chaebol were family dominated. In 1990, for example, in most cases the family that founded the major business in the chaebol remained in control, while in Japan the keiretsu were controlled by professional corporate management. Second, individual chaebol were prevented from buying controlling shares of banks, and in 1990 government regulations made it difficult for a chaebol to develop an exclusive banking relationship. The keiretsu usually worked with an affiliated bank and had almost unlimited access to credit. Third, the chaebol often formed subsidiaries to produce components for exports, while large Japanese corporations often employed outside contractors. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
Growth of the Chaebols Under Park Chung Hee
When the military took over the government in 1961, military leaders announced that they would eradicate the corruption that had plagued the Rhee administration and eliminate injustice from society. Some leading industrialists were arrested and charged with corruption, but the new government realized that it would need the help of the entrepreneurs if the government's ambitious plans to modernize the economy were to be fulfilled. A compromise was reached, under which many of the accused corporate leaders paid fines to the government. Subsequently, there was increased cooperation between corporate and government leaders in modernizing the economy. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
Government-chaebol cooperation was essential to the subsequent economic growth and astounding successes that began in the early 1960s. Driven by the urgent need to turn the economy away from consumer goods and light industries toward heavy, chemical, and import-substitution industries, political leaders and government planners relied on the ideas and cooperation of the chaebol leaders. The government provided the blueprints for industrial expansion; the chaebol realized the plans. However, the chaebol-led industrialization accelerated the monopolistic and oligopolistic concentration of capital and economically profitable activities in the hands of a limited number of conglomerates.
Park used the chaebol as a means towards economic growth. Exports were encouraged, reversing Rhee's policy of reliance on imports. Performance quotas were established. The chaebol were able to grow because of two factors — foreign loans and special favors. Access to foreign technology also was critical to the growth of the chaebol through the 1980s. Under the guise of "guided capitalism," the government selected companies to undertake projects and channeled funds from foreign loans. The government guaranteed repayment should a company be unable to repay its foreign creditors. Additional loans were made available from domestic banks. In the late 1980s, the chaebol dominated the industrial sector and were especially prevalent in manufacturing, trading, and heavy industries.
The tremendous growth that the chaebol experienced, beginning in the early 1960s, was closely tied to the expansion of South Korean exports. Growth resulted from the production of a diversity of goods rather than just one or two products. Innovation and the willingness to develop new product lines were critical. In the 1950s and early 1960s, chaebol concentrated on wigs and textiles; by the mid-1970s and 1980s, heavy, defense, and chemical industries had become predominant.
Early Economic Development Under Park Chung Hee
In 1961 General Park Chung Hee overthrew the popularly elected regime of Prime Minister Chang Myon. A nationalist, Park wanted to transform South Korea from a backward agricultural nation into a modern industrial nation that would provide a decent way of life for its citizens while at the same time defending itself from outside aggression. Lacking the antiJapanese nationalist credentials of Syngman Rhee, for example, Park sought both legitimacy for his regime and greater independence for South Korea in a vigorous program of economic development that would transform the country from an agricultural backwater into a modern industrial nation. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
Park's government was the beneficiary of the Syngman Rhee administration's decision to use foreign aid from the United States during the 1950s to build an infrastructure that included a nationwide network of primary and secondary schools, modern roads, and a modern communications network. The result was that by 1961, South Korea had a well-educated young work force and a modern infrastructure that provided Park with a solid foundation for economic growth.*
The Park administration decided that the central government must play the key role in economic development because no other South Korean institution had the capacity or resources to direct such drastic change in a short time. The resulting economic system incorporated elements of both state capitalism and free enterprise. The economy was dominated by a group of chaebol, large private conglomerates, and also was supported by a significant number of public corporations in such areas as iron and steel, utilities, communications, fertilizers, chemicals, and other heavy industries. The government guided private industry through a series of export and production targets utilizing the control of credit, informal means of pressure and persuasion, and traditional monetary and fiscal policies.*
The government hoped to take advantage of existing technology to become competitive in areas where other advanced industrial nations had already achieved success. Seoul presumed that the well-educated and highly motivated work force would produce lowcost , high-quality goods that would find ready markets in the United States and the rest of the industrial world. Profits generated from the sale of exports would be used to further expand capital, provide new jobs, and eventually pay off loans.*
Government Role in Economic Development
In 1961 Park extended government control over business by nationalizing the banks and merging the agricultural cooperative movement with the agricultural bank. The government's direct control over all institutional credit further extended Park's command over the business community. The Economic Planning Board was created in 1961 and became the nerve center of Park's plan to promote economic development. It was headed by a deputy prime minister and staffed by bureaucrats known for their high intellectual capability and educational background in business and economics. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
Beginning in the 1960s, the board allocated resources, directed the flow of credit, and formulated all of South Korea's economic plans. In the late 1980s, the power to allocate resources and credit was restored to the functional ministries. In 1990 the Economic Planning Board primarily was charged with economic planning; it also coordinated and often directed the economic functions of other government ministries, including the Ministry of Finance. The board was complemented by the Korea Development Institute, an independent economic research organization funded by the government. Other government bodies directing the economy included the Office of the President, which included a senior secretary for economic affairs; the Ministry of Finance; the Ministry of Trade and Industry; the Ministry of Labor; and the Bank of Korea, which was controlled by the Ministry of Finance.*
Park's first major goal, which was immediately successful, was to establish a self-reliant industrial economy independent of the massive waves of United States aid that had kept South Korea afloat during the Rhee years. Modernizing the economy and maintaining overall sustained growth were additional goals in the 1970s. Significant economic policies included strengthening key industries, increasing employment, and developing more effective management systems. Because South Korea was dependent on imports of raw materials, such as oil, a major government objective was to significantly increase the level of exports, which meant stressing greater international competitiveness and higher productivity. The early economic plans emphasized agriculture and infrastructure, the latter were closely tied to construction. Later, the emphasis shifted consecutively to light industry, electronics, and heavy and chemical industries. Using these strategies, an export-driven economy developed.*
The government combined a policy of import substitution with the export-led approach. Policy planners selected a group of strategic industries to back, including electronics, shipbuilding, and automobiles. New industries were nurtured by making the importation of such goods difficult. When the new industry was on its feet, the government worked to create good conditions for its export. Incentives for exports included a reduction of corporate and private income taxes for exporters, tariff exemptions for raw materials imported for export production, business tax exemptions, and accelerated depreciation allowances.*
The export-led program took off in the 1960s; during the 1970s, some estimates indicate, Seoul had the world's most productive economy. The annual industrial production growth rate was about 25 percent; there was a fivefold increase in the GNP from 1965 to 1978. In the mid-1970s, exports increased by an average of 45 percent a year.
Obstacles to Economic Growth During the Park Chung Hee Era
The quadrupling of oil prices beginning in 1973 severely threatened the South Korean economy, which depended heavily on imported oil for energy production. Construction contracts in the Middle East, however, provided the necessary foreign exchange to forestall a balance-of-payments crisis and to continue the high rate of growth. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
The growth-oriented economic strategy emphasizing exports inevitably produced side effects. Although the government previously had been able to manage these side effects and effectively surmount various economic crises, the situation began to deteriorate in 1978. The emphasis on exports had produced a shortage of domestic consumer goods that was exacerbated by the increasing demands brought about by rising wages and the advance in living standards. Price controls imposed on producers of consumer goods discouraged the manufacture of these goods. Meanwhile, the inflow of dollars rapidly expanded the money supply and inflation became a serious problem. According to a Bank of Korea report, consumer prices rose only 14.4 percent in 1978, but most observers agreed that the actual rate was near 30 percent.*
The high rate of inflation continued into 1979. According to a report issued by the Economic Planning Board in August 1979, the average household's cost of living had gone up 26.3 percent from the previous year. Although wages had been rising rapidly during the previous several years — spurred by shortages of skilled and semiskilled workers — the rise in wages began to slow down. The average wage increased 12 percent during the year preceding August 1979.*
To address these ills, Park had replaced the economic team in the cabinet in December 1978 and adopted stabilization measures entailing the lowering of the growth rate: a stringent tight-money policy; a switch of investment capital planned for heavy industries to light industries producing consumer products; a reduction of price controls to encourage more production of consumer goods; and assistance for the poor. But these measures caused a recession, produced a succession of bankruptcies among small and medium loan-dependent enterprises, and increased unemployment.*
Industrial Policies Under Park Chung Hee
The major issue facing the Park regime in the early 1960s was the grinding poverty of the nation and the need for economic policies to overcome this poverty. A critical problem was raising funds to foster needed industrial development. Domestic savings were very low, and there was little available domestic capital. This obstacle was overcome by introducing foreign loans and inaugurating attractive domestic interest rates that enticed local capital into production. Of South Korea, Taiwan, Hong Kong, and Singapore, only South Korea financed its economic development with a dramatic build-up of foreign debt, debt that totaled US$46.8 billion in 1985, making it the fourth largest Third World debtor. Foreign corporate investments were primarily of Japanese origin.*
As noted by consultant David I. Steinberg, Seoul administered a series of economic development plans. The government mobilized domestic capital by encouraging savings, determined what kinds of plants could be constructed with these funds, and reviewed the potential of the products for export. In this sense, the will of the government to undertake economic development played a crucial role; the role of the government, however, was not limited to such measures as mobilizing capital and allocating investments.*
Steinberg also pointed out that Park's government restructured industries, such as defense and construction, sometimes to stimulate competition and other times to reduce or eliminate it. The Economic Planning Board established export targets that, if met, yielded additional government-subsidized credit and further access to the growing domestic market. Failure to meet such targets led to Seoul's withdrawal of credit.
Stephen Evans of the BBC wrote: When South Korea industrialised in the 1960s and 1970s, setting in train its breathtaking transformation from poverty to affluence, it was done in a way to make Western "free-market" economists disapprove. Government direction and government subsidy was the order of the day. South Korea's leader at the time, Gen Park Chung-hee, said "do it" and the corrupt rich he had jailed and threatened had no choice but to create the industries the government decreed. It was "directed capitalism". [Source: Stephen Evans BBC News, May 30, 2015]
Under Park Chung-hee, scores of businessmen were arrested and charged with "illicit profiteering". Property was confiscated. Some were paraded with signs round their necks saying: "I am a corrupt pig." In return for freedom and renewed access to their money, the country's richest people were told to invest in new industries. They had to sign an agreement stating: "I will donate all my property when the government requires it for the construction of the nation." Initially, the plan focused on six key industries (cement, synthetic fibre, electricity, fertiliser, oil refining and iron and steel), but in the early 1970s it turned to shipbuilding.
Economic Plans Under Park Chung Hee
Economic programs were based on a series of five-year plans that began in 1962. The First Five-Year Economic Development Plan (1962-66) consisted of initial steps toward the building of a self-sufficient industrial structure that was neither consumption oriented nor overdependent on oil. Such areas as electrification, fertilizers, oil refining, synthetic fibers, and cement were emphasized. The Second Five-Year Economic Development Plan (1967- 71) stressed modernizing the industrial structure and rapidly building import-substitution industries, including steel, machinery, and chemical industries. The Third Five-Year Economic Development Plan (1972-76) achieved rapid progress in building an export-oriented structure by promoting heavy and chemical industries. Industries receiving particular attention included iron and steel, transport machinery, household electronics, shipbuilding, and petrochemicals. The developers of heavy and chemical industries sought to supply new industries with raw materials and capital goods and to reduce or even eliminate dependence on foreign capital. New (and critical) industries were to be constructed in the southern part of the peninsula, far from the border with North Korea, thus encouraging economic development and industrialization outside the Seoul area and providing new employment opportunities for residents of the less developed areas.*
The Fourth Five-Year Economic Development Plan (1977-81) fostered the development of industries designed to compete effectively in the world's industrial export markets. These major strategic industries consisted of technology-intensive and skilled labor-intensive industries such as machinery, electronics, and shipbuilding. The plan stressed large heavy and chemical industries, such as iron and steel, petrochemicals, and nonferrous metal. As a result, heavy and chemical industries grew by an impressive 51.8 percent in 1981; their exports increased to 45.3 percent of total output. These developments can be ascribed to a favorable turn in the export performance of iron, steel, and shipbuilding, which occurred because high-quality, low-cost products could be produced in South Korea. By contrast, the heavy and chemical industries of advanced countries slumped during the late 1970s. In the machinery industries, investments were doubled in electric power generation, integrated machinery, diesel engines, and heavy construction equipment; the increase clearly showed that the industries benefited from the government's generous financial assistance program.*
The late 1970s, however, witnessed worldwide recession, rising fuel costs, and growing inflation. South Korea's industrial structure became somewhat imbalanced, and the economy suffered from acute inflation because of an overemphasis on investment in heavy industry at a time when many potential customers were not in a position to buy heavy industrial goods.*
The Fifth Five-Year Economic and Social Development Plan (1982-86) sought to shift the emphasis away from heavy and chemical industries, to technology-intensive industries, such as precision machinery, electronics (televisions, videocassette recorders, and semiconductor-related products), and information. More attention was to be devoted to building high-technology products in greater demand on the world market.*
The Sixth Five-Year Economic and Social Development Plan (1987-91) to a large extent continued to emphasize the goals of the previous plan. The government intended to accelerate import liberalization and to remove various types of restrictions and nontariff barriers on imports. These moves were designed to mitigate adverse effects, such as monetary expansion and delays in industrial structural adjustment, which can arise because of a large surplus of funds. Seoul pledged to continue phasing out direct assistance to specific industries and instead to expand manpower training and research and development in all industries, especially the small and medium-sized firms that had not received much government attention previously. Seoul hoped to accelerate the development of science and technology by raising the ratio of research and development investment from 2.4 percent of the GNP to over 3 percent by 1991.*
The goal of the Seventh Five-Year Economic and Social Development Plan (1992-96), formulated in 1989, was to develop high-technology fields, such as microelectronics, new materials, fine chemicals, bioengineering, optics, and aerospace. Government and industry would work together to build high-technology facilities in seven provincial cities to better balance the geographic distribution of industry throughout South Korea.
Revenues and Expenditures Under Park Chung Hee
The central government budget has generally expanded, both in real terms and as a proportion of real GNP, since the end of the Korean War, stabilizing at between 20 and 21 percent of GNP during most of the 1980s. Government spending in South Korea has been less than that for most countries in the world (excepting the other rapidly growing Asian economies of Japan, Taiwan, and Singapore). The share of government spending devoted to investment and other capital formation activities increased steadily through the periods of the first and second five-year plans (1962-1971), peaking at more than 41 percent of the budget in 1969. Since 1971 investment expenditures have remained at less than 30 percent of the budget, while the share of the budget occupied by direct government consumption and transfer payments has continued to increase, averaging more than 70 percent during the 1980s.*
During the 1980s, the largest areas of government expenditure were economic services (including infrastructural projects and research and development), national defense, and education. Economic expenditures averaged several percentage points higher than defense expenditures, which remained stable at about 22 to 23 percent of the budget (about 6 percent of GNP) during the decade. In 1990 the government was studying plans to lower defense expenditures to 5 percent of GNP. Some observers noted a trend toward a slight increase in the portion of the budget devoted to social spending during the 1980s. In 1987 expenditures for social services — including health, housing, and welfare — were 16.4 percent of the budget, up from 13.9 percent in 1980, and slightly higher than 1987 government outlays for education.*
The government revenue structure was virtually totally dependent on taxes. By the early 1980s, nearly two-thirds of tax money was collected in the form of indirect taxes. Revenues collected by the central government in 1987 rose to 19,270.3 billion won, up from 13.197.5 billion won in 1984.*
Financing Development Under Park Chung Hee
Financing South Korea's economic development in the 1990s was expected to differ from previous decades in two main respects: greater reliance on domestic sources and more emphasis on equity relative to debt. Beginning in the 1960s, foreign credit was used to finance development, but the amount of foreign debt had decreased since the mid-1980s. According to the Sixth Five-Year Economic and Social Development Plan (1987-91), an average annual growth rate of 8 percent was expected, together with account surpluses of about US$5 billion a year through 1991.*
To realize these growth targets, South Koreans needed the gross domestic savings rate to exceed the domestic investment rate; additionally, they needed the financing of future economic growth to come entirely from domestic sources. Such a situation would involve reducing foreign debt by US$2 billion a year; and South Korea would become a net creditor nation in the mid-1990s. Through the promotion and reform of the securities markets, especially the stock market, and increased foreign investment, the sixth plan encouraged the diversification of sources and types of corporate finance, especially equity finance.*
Domestic savings were very low before the mid-1960s, equivalent to less than 2 percent of GNP in the 1960 to 1962 period. The savings rate jumped to l0 percent between 1970 and 1972 when banks began offering depositors rates of 20 percent or more on savings accounts. This situation allowed banks to compete effectively for deposits with unorganized money markets that had previously offered higher rates than the banks. The savings rate increased to 16.8 percent of GNP in 1975 and 28 percent in 1979, but temporarily plunged to 20.8 percent in 1980 because of the oil price rise. After 1980, as incomes rose, so did the savings rate. The surge of the savings rate to 36.3 percent in 1987 and 35.8 percent in 1989 reflected the sharp growth of GNP in the 1980s. The prospects for continued high rates of saving were associated with continued high GNP growth, which nevertheless declined to 6.5 percent in 1989.*
According to Donald S. Macdonald, through the early 1980s funds for investment came primarily from bilateral government loans (mainly from the United States and Japan), international lending organizations, and commercial banks. In the late 1980s, however, domestic savings accounted for two-thirds or more of total investment.*
Throughout the 1980s, the financial sector underwent significant expansion, diversification of products and services, and structural changes brought about by economic liberalization policies. As noted by Park Yung-chul, financial liberalization eased interest ceilings. Deregulation increased competition in financial markets, which in turn accelerated product diversification. In the early 1980s, securities companies were permitted to sell securities through a repurchase agreement. By 1985 banks also were allowed to engage in the repurchase agreements of government and public bonds. In 1981 finance and investment corporations started dealing in large-denomination commercial paper. The new form of commercial paper was issued in minimum denominations of 10 million won, compared to the previous minimum value for commercial paper of 1 million won.*
In order to extend their ability to raise cash, investment and finance companies introduced a new cash-management account with a 4 million won minimum deposit in 1983. Investment and finance corporations managed client funds by investing them in commercial paper corporate bonds and certificates of deposit. Money-deposit banks in the mid-1980s began offering similar accounts, known as household money-in-trust. Trust business formerly had been the exclusive domain of the Bank of Seoul and Trust Company; however, after 1983 all money-deposit banks were authorized to offer trust services.*
The financial system underwent two major structural changes in the late 1970s and 1980s. First, money-deposit banks saw a sustained erosion of their once-dominant market position (from 80 percent in the 1970 to 1974 period to 55 percent by 1984). One reason for this decline was that in the 1970s nonbank financial intermediaries, such as investment trust corporations, finance companies, and merchant banking corporations, were given preferential treatment. Further, because the costs of intermediation at these nonbank financial institutions were lower than at banks (with their many branches nationwide and their multitudes of small savers and borrowers), their cost advantages and higher lending rates allowed them a larger market share.*
The second structural change was the rapid increase of commercial paper and corporate debenture markets. Another development was the steady growth of investment trust corporations in the 1980s.*
Because of the introduction of tax and financing incentives by the government that encouraged companies to list their shares on the stock market, the Korean Stock Exchange grew rapidly in the late 1980s. In 1987 more than 350 companies were listed on the exchange. There was an average daily trading volume of 10 million shares, with a turnover ratio of 80 percent. In 1989 the stock market was tarnished by accusations of insider trading among the five major South Korean securities firms. The Securities and Exchange Commission launched an investigation in late 1989. The popular index of the market soared to a high of 1,007.77 points on April 1, 1989, but plunged back to the 800s in late 1989 and early 1990.*
Business financing was obtained primarily through bank loans or borrowing on the informal and high-interest "curb market" of private lenders. The curb market served individuals who needed cash urgently, less reputable businesspeople who engaged in speculation, and the multitudes of smaller companies that needed operating funds but could not procure bank financing. The loans they received, often in exchange for weak collateral, had very high interest rates. The curb market played a critical role in the 1960s and 1970s in pumping money into the economy and in assisting the growth of smaller corporations. The curb market continued to exist, along with the formal banking system, through the 1980s.*
Korean Society and Hard Work under Park Chung Hee
Park Chung Hee’s slogan was “We can achieve anything if we work hard enough.” With good salaries Park recruited the best and brightest into the government and they planned the countries development. Park once said a "a fire burns inside me." He was famous for his 18-hour work days and "vise-like" handshake. The economy seemed to follow his example. During the Park era, the South Korean economy grew in some years at the phenomenal rate of 14 percent, with exports increasing by as much as 40 percent annually. Under what became known as Korean capitalism, the Korean labor force worked hard under harsh conditions for little money.
The rapid pace of industrialization not only changed much of the South Korean landscape, as farmlands were converted into highways and factory sites, but also profoundly modified the social structure, social values, and behavior. As late as 1965, some 58.7 percent of the labor force was engaged in agriculture and fishery, but the percentage declined to 50.4 percent in 1970 and 38.4 percent in 1978. The percentage of workers engaged in secondary industries, including mining and manufacturing, rose from 10.3 percent in 1965 to 35.2 percent in 1970 and 38.4 percent in 1978. Industrialization led to a rapid increase in South Korea's urban population, which rose from 28.3 percent of the total in 1960 to 54.9 percent in 1979. Rapid urbanization compounded the problems of housing, transportation, sanitation, and pollution, and exacerbated other social problems. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
Improved living standards and ever-increasing job opportunities accelerated the desire among South Koreans for education, particularly at secondary schools and institutions of higher learning. In 1960 about one-third of children between twelve and fourteen years of age attended middle schools; that proportion increased to 53.3 percent in 1970 and 74.0 percent in 1975. In 1960 some 19.9 percent of the population between fifteen and seventeen years of age attended high schools; that proportion increased to 29.3 percent in 1970 and 40.5 percent in 1975. By 1970 about 9.3 percent of college-age youths attended colleges and universities and the number of university graduates exceeded 30,000 a year. Eight years later, 41,680 students graduated from four-year institutions of higher learning.*
Most workers with higher education qualifications were absorbed by the rapidly growing industrial and commercial sectors, joining the ranks of the growing middle class. Demands and rewards for people in the more prestigious fields — doctors, lawyers, economists, scientists, and managers — were increasing. The number of white-collar workers in commerce, industry, banking, civil service, and the teaching profession also rose, as did the number of small entrepreneurs and retailers.*
A high proportion of those people who regarded themselves as middle class resided in Seoul, the locale for much of the nation's wealth, talent, and many of its cultural resources. As beneficiaries of the rapidly expanding economy, much of the middle class either was content with its situation or indifferent to politics. Many highly educated persons in this group who found themselves in less well-paid positions than they would have liked remained dissatisfied, and together with students and intellectuals they formed the core of opposition to the Park regime.*
Rural villages also underwent changes of revolutionary proportions, particularly after 1971. As the government had emphasized industrial growth and slighted the agrarian sector, agricultural production lagged; its annual rate of growth during the 1967-72 period was only about 2.5 percent. With overall GNP growing at over 10 percent a year during the same period, the rural economy steadily lost ground, until by 1969 farm income was only a little more than half that earned by urban workers. This situation contributed to the high rate of migration to the cities and eroded political support for the president.*
This situation led the government to take active measures to increase farm productivity and income in 1971. Government subsidies to farmers were increased by setting relatively high prices for grains. Higher-yield rice varieties were introduced. Advanced agricultural technology was made more widely available through extension services and more fertilizers and credits were provided. As a result of these measures, farm productivity and farm income increased very rapidly during the ensuing years, and the rate of emigration to the cities tapered off.*
The dominant theme of the Park government in the 1970s was Saemaul ("the New Community Movement"). Schoolbooks were smothered in Saemaul sentiments and every South Korean was expected to sing the "Saemaul Song" with religious devotion every morning. One-and-a-half-minute propaganda films shown before feature films at theaters featured the song as well as Park standing before he Korean flag while the national anthem was played.
The Saemaul Movement was instituted with great fanfare by Park in the fall of 1971. The movement was envisioned as a highly organized, intensively administered campaign to improve the "environment" quality of rural life through projects undertaken by the villagers themselves with government assistance. The bureaucracy, particularly at the regional and local levels, was mobilized on a massive scale to ensure that the program would be carried through to completion in all 36,000 villages. The initial emphasis was on improving village roads and bridges and replacing thatch with tile or composition roofs. [Source: Andrea Matles Savada and William Shaw, Library of Congress, 1990*]
The momentum was maintained and increased in subsequent years as the Saemaul Movement evolved into a major ideological campaign aimed at the psychological mobilization of the entire country in support of "nation building." During the first two or three years, emphasis continued to be on improving the village environment, but later focus was shifted toward projects designed to raise agricultural productivity and farm income.*
As local government officials were jolted out of their traditional lethargy by the continuing insistence of higher authorities that essential services be delivered to farmers, the farmers began to have ready access to agricultural extension services, rural credit, and market information. The result of improved services and increased resource allocation was that farmers became more confident of their ability to improve the village environment through their own cooperative efforts and became more convinced of the usefulness of outside official help. As a result of the Saemaul Movement, about 85 percent of villages had electricity, and about 60 percent of farm households had television sets by the late 1970s. Some 85 percent of rural children continued from free, obligatory primary schooling to middle school, and over 50 percent of these middle school pupils were entering high schools. Many farmers also acquired modern amenities that had been available only to city dwellers just a decade earlier, such as sewing machines, radios, irons, and wall clocks.
The Archives of Saemaul Undong was placed on UNESCO Memory of World Register in 2013. According to UNESCO: The movement laid the foundation for Korea to grow into a major economy from one of the world's poorest countries. Saemaul Undong marked the first step in this remarkable journey. The experience of the Korean people in this process is a valuable asset for humankind. Between 1970 and 2011, some 53,000 public officials and village leaders from 129 nations visited Korea to learn about Saemaul Undong.
According to the South Korean government: “Korea today is one of the world's highly developed countries as well as a benchmarking model for many developing nations as it achieved rapid economic growth, much thanks to the Saemaul Undong Movement. This helped the country to step out from the list of the world’s poorest to a major player in the world economy in the present day. Laying a significant foundation, the world has also acknowledged this remarkable journey, introducing the process as a valuable asset for humankind to learn. The archives include presidential speeches, government papers, village documents, letters, manuals, photographs and video clips related to the movement conducted from 1970 to 1979. The Saemaul Movement has been emulated by countries in Asia and Africa. [Source: Korea Tourism Organization visitkorea.or.kr ]
Saemaul Movement in a Korean Village
On life in a Korean village, Donald N. Clark wrote in “Culture and Customs of Korea”: “The most revolutionary influence in the life of Kongnam-ni in the 1970s was the success of the government's Saemaul (or "New Community") Movement. The Saemaul Movement was President Park Chung-hee's response to the criticism that his administration was paying too much attention to industrialization at the expense of the farm sector, which was continuing to languish in poverty. The Saemaul Movement therefore was a national push to improve living standards at the village level. [Source: “Culture and Customs of Korea” by Donald N. Clark, Greenwood Press, 2000]
“Under the slogan "Diligence, Self-Help, and Cooperation" the government targeted many areas at once. For example, after having developed a national cement industry in the 1960s, the Park administration was able to give 300 bags of cement to each of more than 35,000 villages on the condition that it be used for community purposes such as irrigation, sanitation, and construction of buildings for common use.
“To improve transportation the government built more than 65,000 small bridges to make weather roads out of the tracks that flooded like the one leading from Poksu to Taejon. The layers of rice straw that thatched millions of Korean farmhouses were economically replaced with roofs made of cement tiles that did not rot in the rainy season, house innumerable rats and insects, and require laborious re-thatching every autumn. The movement also augmented the nation's rudimentary public health program by assigning government-paid doctors to small towns and villages, building health centers in places like Kongnam-ni, extending health education classes to villagers, and increasing the number of family planning and communicable disease control workers. Since much of the countryside was afflicted by waterborne diseases such as typhoid and cholera, the government pushed the construction of safe water supplies.
Agriculture Improvements and Training Brought by Saemaul Movement
Clark wrote: “The Saemaul Movement funded the digging of new wells that were away from the polluted water tables of the villages themselves and ran pipes to communal faucets and, eventually, into individual homes. Partly as a public health measure but mostly to boost production, the government invested in the production of two kinds of farm chemicals: pesticides and nitrogen fertilizer. Though the pesticides created pollution problems of their own, they cut down on the crop losses that were due to insects and rodents. The fertilizer, which was distributed at subsidized rates through the National Agricultural Cooperative system, replaced the manure that had been used through the 1960s and enabled farmers to continue growing two crops a year safely in many fields without completely depleting the nutrients in the soil. [Source: “Culture and Customs of Korea” by Donald N. Clark, Greenwood Press, 2000]
“The country's industrial development also spun off new products that proved essential for rising living standards in the countryside. The new plastics industry made vinyl sheeting available to farmers to use in two ways. They spread the vinyl on fields to hold in moisture and control pests while the plants themselves grew up through holes punched in the plastic, and they built greenhouses to grow high-profit vegetables during the colder weeks of early spring and late autumn.
“Another type of industrial product was the small gasoline engine that was adapted for use as a "mechanical ox," a gas tractor that could be hooked up to a plow, or hitched to a wagon, or connected to a pump, performing a variety of tasks more cheaply and efficiently than animal power. The mechanization process also led to the spread of more sophisticated machines to harvest and thresh the grain crops. One machine even took trays of new rice seedlings and transplanted them in wet rice paddies row by row, ending the ordeal of having the villagers line up in water up to their calves and bend over to push the seedlings into the mud one by one. But the most important agricultural innovation of all was the development of a new kind of high-yield rice that dramatically increased the country's annual grain output and enabled the growing population to retain rice as its staple food. Increased production meant rising farm income without a rise in prices in the market. The new rice strain was accompanied by increased efficiency as Saemaul Movement workers showed farmers how to share resources through coordinated planning and cooperative work.
“The government set up training institutes and cycled thousands of farmers through classes on organization and leadership. The central training institute in Suwon started training in 1972 with 150 village leaders from across the country and by 1988 was training more than 20,000 a year. Koreans regard the Saemaul Movement as a great success. The cooperative elements of the movement were translated into urban projects as well. Though critics complained that the training institutes were dispensing a kind of government propaganda that limited the vision of Korea's future to one industrial-style model, the exposure of professors, businessmen, judges, and religious leaders to the cooperative ethic of the Saemaul Movement seems to have contributed something to an evident national determination to work together to overcome long odds. [Source: “Culture and Customs of Korea” by Donald N. Clark, Greenwood Press, 2000]
“Without the government-led development of community spirit, one wonders, for example, if Korea's spectacular success in reforestation would have been possible. On a daily basis one notices improvements in community consideration: respect for people ahead in a line for tickets or taxis, an end to spitting on the sidewalk, less shoving, less littering, and slightly better driving. High in the mountains of central Korea, the economic modernization of South Korea and the Saemaul Movement brought revolutionary changes to Kongnam-ni. The roads that fork in the center of the hamlet were paved, and more than a few households own private cars, a thing that could not have been imagined in the 1970s.
To Build a Nation (1971) by Park Chung Hee
According to Columbia University’s Asia for Educators: Park’s years in power were marked by both rapid economic development and authoritarian government under which civil rights were repeatedly suspended. In this passage from his 1971 book To Build a Nation, Park reflected back on the early 1960s. [Source: Asia for Educators Columbia University afe.easia.columbia.edu ]
Park Chung Hee wrote in “To Build a Nation”: “When I took over power as the leader of the revolutionary group on 16 May 1961, I felt, honestly speaking, as if I had been given a pilfered household or a bankrupt firm to manage. Around me I could find little hope or encouragement. The outlook was bleak. But I had to rise above this pessimism to rehabilitate the household. I had to break, once and for all, the vicious circle of poverty and economic stagnation. Only by curing the abnormal economic structure could we lay the foundation for decent living standards. But I soon came to realize the difficulty of simultaneously achieving our goals of social stability and economic development and the goal of efficient government. I was also aware of the fact that economic development in the capitalist manner requires not only an immense investment of money and materials but also a stable political situation and competent administrators. [Source: from “To Build a Nation” (1971) By Pak Chonghŭi (Park Chung Hee), pp. 101.114; “Sources of Korean Tradition”, edited by Yong-ho Ch’oe, Peter H. Lee, and Wm. Theodore de Bary, vol. 2 (New York: Columbia University Press, 2000), 396-398]
“Before May 16 the Korean economy was in disorder. Accumulated political blunders and misguided economic policy had utterly disarranged it. The postwar rehabilitation of the nation was at a near.standstill, while the amount of grant-type foreign aid was lessening. Economic stagnation aggravated poverty and unemployment. Farmers’ debts rose sharply … With growth at a standstill at the turn of the 1960s, Korea found itself one of the lowest income countries in the world. The industrial structure was not solid. Due to a huge gravitation toward them of a huge amount of foreign aid, the secondary and tertiary industries seemed excessively swollen in comparison with primary industry...
“The institutional and moral aspects of the society were no better. People fatalistically took poverty and reliance on foreign aid as unavoidable facts of life. Businessmen and industrialists failed to fulfill their important role in economic development. Many corrupt government officials and parvenus worked together to amass illegal fortunes. The market, suffering from its small scale and lack of vigorous competition, did not function normally. The underdeveloped agricultural system was unable to meet the demand for food — we were forced to rely on the farm products of advanced countries. The whole economy was afflicted by inexperience, inefficiency, and wasteful management.
To achieve this stability, the military revolutionary government temporarily suspended political activities of students, the press, labor unions, and other social and political organizations, which had caused political crises and social unrest during the rule of the Democratic Party regime. We also made it clear that civilian government would be restored in 1963.
Meanwhile, we organized a planning committee of college professors and experts with specialized knowledge in many fields. By mobilizing the maximum available expertise for government administration and policy making, we intended to hold in check the arbitrariness and rashness of the military officers. The establishment of this committee served as a turning point. Korean professors began to show positive interest in the realities of the country and to present policy recommendations on the basis of scientific analyses of the country’s situation. Even though not all of these recommendations could be justified in terms of efficiency and rationality, their advice was of great help to the revolutionary government. Thus the Confucian tradition of Yi Korea, in which scholars played a positive part in government affairs, seems to have been revived.
The key to improving a backward economy is the way one uses human resources, for economic development is a human undertaking, impossible without combining the people’s potential into a dynamic driving force. This task requires not only strong national willpower but also the ability to translate willpower into achievement. Blueprints must be drawn and explained. If people have a sympathetic understanding of a task, they will voluntarily participate in it.
In 1961 the revolutionary government announced the first Five.Year Economic Development Plan (to start in 1962), the first such overall development program ever prepared for Korea. To prepare it, the revolutionary government mobilized all the wisdom and knowledge available and set clear goals, the primary goal being to establish a self.supporting industrial economy. The principle of free enterprise and respect for the creativity of private industry was adopted, for in this way we believed that the private sector would be encouraged to act voluntarily. Under the plan, however, the economy was not entirely free, since development of basic industries was directed by the government.
Taking into consideration the structural characteristics of the Korean economy, the five.year
plan gave priority to the following things:
1) Development of energy industries such as coal production and electric power;
2) Expansion of agricultural production aimed at increasing farm income and correcting the structural imbalance of the national economy;
3) Development of basic industries and the economic infrastructure;
4) Maximum utilization of idle resources; increased employment; conservation and utilization of land;
5) Improvement of the balance of payments through export promotion;
6) Promotion of science and technology.
“Five Bandits” By Kim Chiha: An Expression of an Exploited Work Force
Unions and a strong labor movement did not really take hold in South Korea until after the Park Chung Hee era, meaning that to varying degree workers were forced to work hard for low wages, and this helped fuel the nation’s rapid economic growth. According to Columbia University’s Asia for Educators: “The pattern of South Korean development under Park Chung Hee and his successor in the 1980s, Chun Doo-Hwan, met strong resistance from students, laborers, farmers, religious organizations, and others who felt that Korea’s export-led growth (often conditioned on cheap labor) benefited the wealthy, corporations, and the state while exploiting the majority of the populace. One famous poetic expression of discontent came in the form of a satirical poem, “Five Bandits” (Ojok), written by Kim Chiha (Kim Ji-ha, b. 1941) and published in 1970. Kim’s poem adopted stylistic features of p’ansori, a traditional mode of oral performance that often had its own ribald and satirical elements; such use of traditional folk culture would become central to oppositional movements by the 1980s. For this and other poems, Kim was arrested, imprisoned, and tortured as an alleged North Korean agent; later, in 1974, he would be sentenced to death for advocating rebellion, though he was eventually released because of heavy international pressure on the Pak government. [Source: :Asia for Educators Columbia University, afe.easia.columbia.edu ^^^ ]
One passage from “Five Bandits” (1970) By Kim Chiha goes: “The spring sun was warm, the day pleasant, the wind gentle, the clouds floating by. The five bandits, each brandishing a golf club, each determined to win, set out to display their miraculous skills. The first bandit stepped forth, the one called the business tycoon, wearing a custom.made suit tailored of bank.notes, a hat made of banknotes, shoes made of banknotes and gloves knitted of banknotes, with a gold watch, gold rings, gold buttons, a gold necktie pin, gold cuff links, a gold buckle, golden teeth, golden nails, golden toenails, and golden zippers, with a golden watch chain dangling from his wiggling ass. [Source: “Sources of Korean Tradition”, edited by Yong-ho Ch’oe, Peter H. Lee, and Wm. Theodore de Bary, vol. 2 (New York: Columbia University Press, 2000), 403-405; :Asia for Educators Columbia University, afe.easia.columbia.edu ^^^ ]
“Now the second bandit steps forth with his cronies from the National Assembly. Here
come hunchbacks, alley foxes, angry dogs, and monkeys. Hunched at the waist, their eyes are as
narrow and slanted as Ts’ao Ts’ao.1 Lumbering, rasping, covering their hairy bodies with the
empty oaths of revolution, coughing up mucus, raising their golf clubs high into the sky like
flags, thunderously yelling slogans, rolling on viper.colored jagged floors:
Revolution, from old evil to new evil!
Renovation, from illegal profiteering to profiteering illegally!
Modernization, from unfair elections to elections unfair!… [1 Ts’ao Ts’ao (155.220), Emperor Wu of Wei. Generalissimo and chancellor during the declining years of the Later Han dynasty; he was known for ruthlessness.]
“Now the third bandit emerges, looking like a rubber balloon with viperous pointed eyes, his lips firmly closed. Portraying a clean government official, when sweets are offered, he shows that he doesn’t like them by shaking his head. Indeed, it must be true. But look at this fellow’s other face. He snoops here and smiles there, stout, impudent, sly; his teeth are crooked and black from an over indulgence in sweets, worn out until they could decay no more.
“He sits in a wide chair as deep as the sea, before a desk as high as the sky, saying “no thank you” with one hand and “thank you” with the other. He cannot do possible things, but he can do impossible things; he has piles of documents on top of his desk and bundles of money under it. He acts like an obedient shaggy dog when flattering superiors, but like a snarling hunting dog to subordinates. He puts public funds into his left pocket and bribes for favors done into his right pocket. His face, a perpetual mask of innocence, conveys purity — the purity of a white cloud. His all.consuming passion is asking after the wellbeing of madams of deluxe restaurants.
“The fourth bandit steps forth, a big gorilla. He is tall, reaching almost to the heavens. The marching column of soldiers under his command is as long as China’s Great Wall. He has white tinted eyes, a tiger’s mouth, a wide nose, and a shaggy beard; he must be an animal. His breast is adorned with colorful medals made of gold, silver, white copper, bronze, and brass.
“Black pistols cling to his body. He sold the sacks of rice meant to feed the soldiers, and filled the sacks with sand. He stole the cows and pigs to be fed to the soldiers, and gave a hair to each man. No barracks for the poor enlisted men in a bitterly cold winter; instead, hard labor all day to keep them sweating. Lumber for the construction of barracks was used for building the general’s quarters. Spare parts for vehicles, uniforms, anthracite briquettes, monthly allowances, all were stolen. In accordance with military law, soldiers who deserted their units because of hunger and desperation were arrested, beaten and thrown into the brig, and harassed under orders. University students summoned for military service were assigned to the general’s quarters as living toys for his wanton wife. Meanwhile the general enjoyed his cleverly camouflaged life with an unending stream of concubines.
“Now the last bandit and his cronies step out: ministers and vice ministers, who waddle from obesity, sediment seeping from every pore. With shifty mucus.lined eyes, they command the national defense with golf clubs in their left hands, while fondling the tits of their mistresses with their right. And, when they softly write “Increased Production, Increased Export and Construction” on a mistress’s tits, the woman murmurs “Hee.hee.hee, don’t tickle me!” And they jokingly reproach: “You ignorant woman, do national affairs make you laugh?” Let’s export even though we starve, let’s increase production even though products go unsold. Let’s construct a bridge across the Strait of Korea with the bones of those who have starved to death, so we can worship the god of Japan! Like slave.masters of olden times, they drive the people to work harder and longer, with the beating of burst drums and the sounds of broken trumpets, with one aim in mind: to increase their own wealth.”
How Exports Fueled South Korea’s Economic Miracle
According to the World Bank: “The magnitude of the economic expansion in South Korea during the past 50 years has been staggering; the GDP in 2009 was more than 30 times higher than in 1960. Even more importantly, Korean authorities have shown that they are capable of successfully managing the economy inthe times of crisis. During both recent downturns—in 1997 as well as 2008—the government was able to react quickly and decisively. The macroeconomic prospects are good too. After one of the most severe crises in the past century, economic growth is robust, unemployment low (3.3 percent), and public finances stable. The public deficit is forecast to be close to zero in 2013. IMF (2010) points out that despite high dependence on exports, the country’s current account surpluses are relatively modest. GDP is expected to grow on average at about 4 percent per year between 2011 and 2016, while exports of goods will increase on average by more than 10 percent annually. [Source: World Bank]
“Korea has managed to leapfrog in 50 years from a low-income country to an industrialized economy. Its nondistorted labor costs and skilled labor allowed the country to expand exports for several decades. Taking advantage of regional integration and the rise of, first, Japan and then China—positioning itself first as a recipient of off-shoring from Japan and then off-shoring its activities to emerging Asia—gave Korea an important advantage. Korea’s FDI in the region exceeded US$10 billion in 2007 and ultimately, if other Asian economies grow, so will South Korea. Moreover, due to rapid growth in exports of movies, videogames, and soap operas, Korea is also becoming a cultural center of the region.
“Government support for exports (industrial policies), outward orientation (opening trade, free market institutions) and external support from more advanced economies (especially Japan) were significant factors for export development in the past, and an evolving mix of similar factors (especially trade links with China) may prove to be beneficial for growth in the future. It is difficult to assess how replicable the Korean model is. But over the past 60 years Korea has shown one feature that others would be well-advised to study: a mix of policies that allows for successful adjustment to changing domestic, regional, and global conditions.
Dark Side of the Economic Miracle
According to “Governments of the World”: ““South Korea's economic development came at a very high price, however. Between 1961 and 1987, in particular, labor movements and strikes were often met with brutal violence. Not surprisingly, working conditions were generally extraordinarily oppressive. Indeed, South Korea has long had one of the worst records for industrial safety in the world. In 1986, nearly 3 percent of Korea's entire industrial workforce suffered injuries requiring at least a four-day hospital stay, and 1,660 workers were killed in industrial accidents.” [Source: “Governments of the World: A Global Guide to Citizens’ Rights and Responsibilities”, Thomson Gale, 2006]
“In addition, South Korean workers routinely worked the longest hours among workers in all industrializing and industrialized countries, and wages were kept artificially low to increase South Korea's industrial competitiveness. The focus on rapid industrialization also reflected the government's equally strong obsession with national security. This combination created fertile ground for human rights abuses and political repression, both of which were serious problems in South Korea prior to 1987.
“At the same time, South Korean firms (most of which were family-owned) had access to heavily subsidized loans through government-controlled banks and were protected from international competition in the domestic market. A few favored firms were also protected from domestic competition, which encouraged them to diversify into a wide range of products and services. This enabled many firms, called chaebol, to grow with blinding speed and develop immense economic and social power. By the 1990s, some of these firms had developed into major international players, including Hyundai, Samsung, LG (originally known as Lucky-Goldstar), and Daewoo. The extreme concentration of economic power has long been considered a danger to the country's political, social, and even its economic development.”
Image Sources: Wikimedia Commons.
Text Sources: South Korean government websites, Korea Tourism Organization, Cultural Heritage Administration, Republic of Korea, UNESCO, Wikipedia, Library of Congress, CIA World Factbook, World Bank, Lonely Planet guides, New York Times, Washington Post, Los Angeles Times, National Geographic, Smithsonian magazine, The New Yorker, “Culture and Customs of Korea” by Donald N. Clark, Chunghee Sarah Soh in “Countries and Their Cultures”, “Columbia Encyclopedia”, Korea Times, Korea Herald, The Hankyoreh, JoongAng Daily, Radio Free Asia, Bloomberg, Reuters, Associated Press, BBC, AFP, The Atlantic, Yomiuri Shimbun, The Guardian and various books and other publications.
Updated in July 2021