The Political Economy of South Korea:
A Necessary Transformation
In this paper, I will discuss the measures that the Republic of Korea’s (addressed as South Korea from here on out) government took in trying accomplishing economic development despite its several economic and political upheavals. I will, specifically, review the economic growth and institutions established in South Korea beginning in the 1950s, the process of democratization in South Korea, and the effects that the Asian Financial Crisis of 1997 had on South Korea. With the background information of these factors, I will then delve into the importance of South Korea becoming an economic power and the impact it has had on the United States of America. II. Miracle on the Han River:
South Korea has experienced a turbulence of economic downfalls and political uprisings since the 1950s. At the end of the Korean War, which lasted from 1950 to 1953, South Korea was in a major economic slump. The Gross Domestic Product (GDP) of South Korea in 1954 was $1.5 billion and its per capita GDP was a mere $70. It was toward the end of 1953 that South Korea and the United States of America signed the U.S.-South Korean Mutual Security Treaty that established America’s responsibility to protect South Korea from external aggression in Washington’s anti-communist wave. It was the United States’ duty to provide South Korea with military and economic aid in order for South Korea to begin its transformation from being one of the poorest nations in the world to being the 15th largest economy in the world in a span of about seventy years. From 1946 to 1976, the United States, alone, provided South Korea with $12.6 billion to assist in its economic growth. Several other nations, such as Japan, also provided South Korea with aid. Under the government of Park Chung-Hee in 1962, an authoritarian government was established because it was Park’s belief that a strong authoritarian government was essential in promoting rapid economic growth. Beginning in 1962, South Korea developed a series of five-year economic development plans to industrialize its economy. Several policy changes and politico-economic institutions that were established had emphasized export and labor-intensive heavy industries, including steel and shipbuilding industries. Park wanted to ensure the government had control over established institutions, which were overseen by three government bodies: the Ministry of Commerce and Industry, the Ministry of Finance, and the Economic Planning Board (EPB). The Ministry of Commerce and Industry guided corporate activities with the approval of the government. The Ministry of Finance was in charge of fiscal and monetary policies, so if the government did not believe that a company could contribute to the economic development of the nation, then it would never obtain a bank loan. The Economic Planning Board was essential in coordinating programs of economic planning, central budgeting, and foreign capital management and statistics. These three government bodies determined the path of the economy through economic planning and by controlling company actions and spending.
The Park administration was most interested in having an export-oriented economic policy; therefore it favored export-oriented companies. When managing its limited financial resources, the government distributed them to very few diverse conglomerates that they thought would last in a competitive, international market, which are known as chaebol. In order to stay in the government’s good-graces to receive financial resources, the chaebol were forced to conform to the government’s guidelines. The chaebol was the largest influence when it came to the South Korean economic transformation. The South Korean economy went from an agricultural society to a technologically advanced, export-oriented industrial economy in a span of only twenty years. III. Democratization of the South...
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