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Korean economy independent countries South Korea
Korean Economy: Independent Countries--South Korea (1945- )
Figure 1.--Japan seized control of Korea (1909). At the time Korea was a backward pre-industrialized society as can be seen here in a photograph taken at about the time of the Japanese conquest. Japan turned Korea into a colony and developed a substantial industrial complex in what had a primitive agricultural economy. Almost all of that development was in the north where natural resources like coal were available. The economy of the south continued to be largely agricultural. Thus when Korea was divided after World War II and the Japanese surrender (1945), you not only had a communist north and a non-communist south, but an industrialized north and an agricultural south. Thus it looked like North Korea with its industrialized base and natural resources would dominate the Peninsula. Instead Communist totalitarianism and socialist economics turned the North into an economic wasteland with abject poverty and rampant starvation. Capitalism and democracy turned the South even though it had few resources beyond its people into one of the great success stories of the post-War era. South Korea became one of the Asian Tigers--an industrial giant and one of the most prosperous countries in the world.
Japan committed national suiside by launching the Pacific War (1941). One of the results of Japan's defeat was the end of colonial rule in Korea (1945). Korea was occupied by the World War II victors, the United States in the south and the Soviet Union in the North. The idea of unifying the two occupation zones based on democratic elections soon faltered when Stalin, as in Eastern Europe, moved to install a Comminist police state in the north. The south at the time was poorr area of Korea. It was mostly an agricultural area with few natural resources or installed indistrial base. The Japanese had pursued a program of industrialization, but mostly in the north where the natural resources were located.
North Korea heavily armed by the Soviets invaded the South in an effort to unify the country, launching the Korean War (1950-53). This brough untold destruction and death, but changed the border little. What little modern infrastructure which existed in the south was destroyed. Little changed immediately after the War. South Korea survived on American foreign aid. The country was largely ruled by the Army. The population lived in poverty, not unlike much of Asia. Large numbers of unemployed people struggled in a largely agricultural economy offering little opportunity. General Park Chung-hee seized power (1961). Park launched the Saemaeul movement concentrating on developing rural Korea. Very little industry existed in South Korea at the time. The Park Government was criticized at the time for human rights abuses (mild in comparison to what was going on in the North). Articles appeared in the West charging the Park Government as repressive and undemocratic. The Government began an economic devlopment program using the one resource South Korea had--cheap labor. This would be th catalyst for the Miracle on the Han. A capitalist democracy developed in the south and a Communist totalitarian state in the north. The results were staggering. A rich vibrant market economy with world class industry emerged in the south. South Korea emerged as on of the asian Tigers. The command economy in the north has brough economic decline, hunger, and repression. One Korean scholar writes, "The post colonial decades, when living standards improved rapidly in South Korea, while North Korea returned to the world of disease and starvation. The dramatic history of living standards in Korea presents one of the most convincing pieces of evidence to show that institutions — particularly the government — matter for economic growth." [Cha] One of the most dramatic expression of the differences between North and South Korea is night time satellite imagery. South Korea energes as a bright jewel of modernity while Koreas in the North are visually shown as living in a new Dark Age. Market capitalism in three decades transformed South Korea into one of the most modern prposperous coutries in Asia and Seoul was transformed into a sparkling global city, a major hub of business and finance . South Korea today is an modern ntion rivaling Japan and Western Europe with an advanced technological and communications infrastructure.
Economic History
The North and South Korean economies began indepndent economic life with the Japanese colonial economy. THey both took over the command economic system established by the Japaset by the Japanese colonial authorities to prepare for the invasion of China and eventuslly to fight the Pacific War. The Japanese promoted industrial development, most of which was concentrated in the north to take advantage of availble natural resources, especially coal. This raised the standard of living in the North which for the first time exceded that of the more agricultural south. This was a factor leading Kim Il Sung to believe he could successfully invade the South (1950). The War was a disaster for both North and South Korea. The economy recovered slowly, but the American military commitment brought in capital that slowly began to stimulate the largely agricultural South Korean economy. South Korean officials adopted the same socialist oriented economics prevlent thrroughour the developing world, but the economic freedom began to reverse the North/South split iof the Japanese colonial era. A major step was the land reform in the South that put land ownership in the hands of small-scale farmers. In the North, collectivization had the same adverse impact that it had whereever tried. The North began to lag behind the faster growing South. At first the difference was marguinal. When South Korea began to adopt market reforms and embrace capitalism, the economy took off leaving the moribund North Korean economy in the dust.
World War II (1941-45)
Japan committed national suiside by launching the Pacific War (1941). Korea was a Japanese colony and part of the Japanese war effort. During the war, Korea was an important support for the Japanese war effort. Impprtant raw materials existed in the north, especiall iron and coal. And the Japanese developed one of the most important industrial coplexes in Asia outside of the Home Islands. The South had very little industrial development and was almost entirely agricultural. Thus Korea contrinuted both industrial ana agricultural production to the Japanese war effort. The Japanese also conscripted Koreans, mostly to seve in labor brigades. Some women and girls were forced in prositution as 'comfort girls'. Fortunately for Korea, the industrial targets were in the north, beyond the effective range of American bombers.
Independence (1945)
One of the results of Japan's defeat was the end of colonial rule in Korea (1945). Korea was occupied by the World War II victors, the United States in the south and the Soviet Union in the North. This division was meant to be temporary until elections could be held. The idea of unifying the two occupation zones based on democratic elections soon faltered when Stalin, as in Eastern Europe, moved to install a Comminist police state in the north. Korea like divided Germany would become a test case for comparing democracy and capitalism with Communist totalitarianism and socialism.
The Republic of Korea (ROK) emerged in the south after the Paciic War. As strange as it may seem today, the South at the time was poorer area of Korea. It was mostly an agricultural area with few natural resources or installed industrial base. The Japanese had pursued a program of industrialization, but mostly in the north where the natural resources were located. Before World War II, colonial Korea's trade was controllrf by Japane authoritiesnand thus almost entirely with Japan. The de-colonization process and political division disrupted trade both with Japan and within Korea. This caused causing serious economic turmoil. The United States provided limited economic assistance. The U.S. military government seized and privatized properties previously owned by the Japanese government and civilians and transferred the assetts to Korean authorities. The basic economic activity at the time was agriculture. The South Korean government when established, carried out a land reform, making land ownership more egalitarian (1948). This would adversely affect many peasant recpients when the Communists invaded. The Comminists were prone to execute land owners, even small propritors.
North Korea heavily armed by the Soviets and oromted by Stalin without provocation invaded the South in an effort to unify the country, launching the Korean War (1950-53). The United States had provided some economic assistance to the south, but little military assistance. In partictular the ROK Armny bhad virtually no heavy weaponry. This War brough untold destruction and death, but changed the border betwwe north and South very little. Some 1.5 million South Koreans were killed during the war. About a quarter of the ROK's capital stock was destroyed.
Much of the limited modern infrastructure which existed in the south was destroyed in the Korean War. Little changed immediately after the War. South Korea survived on American foreign aid. The country was largely ruled by the Army. The population lived in poverty, not unlike much of Asia. Large numbers of unemployed people struggled in a mostly agricultural economy using primitive methods. The economy offered little opportunity. The country was short of everything, including food in an agricultural area. The only resource the South had was a relatively well educated people, in part thanks to the Japanese. The United States paid little attention to Korea before the Korean War. Beginning with the War the United States began a major aid program. The military presence of the United States and other counries by itself provide an economic stimulus. With the end of the Korean War, ROK officials set about rebuilding a destroyed economy. They pursued similar policies adopted by other new countties in the de-colonization process in Asia and Africa. ROK economic managers attemnpted to stimulatie economic growth by promoting indigenous industrial firms. The Government selected companies in industries considered important. They were given preferential treatment. such as access to foreign currencies and and credit at preferential rates. The Government erected high tariff barriers to protect domestic industries. Imports of manufactured goods was virtually imported. The theory was that the protection would give domestic manufactures the ability to become modern, efficent producers. The economic policy was known as import-substitution industrialization (ISI). In practice, however, rather than develop into competive corporations, Korean entrepreneurs, like businessmen in other developing countries attempting this policy in reality tended to be more concerned in maximizing Government support than the more difficult task of building a modern competive manufacturing concern. The commonly obtained favors by bribing Governmen bureaucrats and politicians. This same outcome was occuring throughout the many new states created by de-colonization. Economists created a new term for what occurred -- directly unproductive profit-seeking activities (DUP). The result rather than creating conditions for the development of a modern manufacturing industry, the efficiency of existing manufacturing actually declined. Living standards stagnated at very low levels. This was part of the reason that the Firt Republic collapsed (April 1960).
Military Rule (1961)
General Park Chung-hee and the ROK Army seized power (1961). Park launched the Saemaeul movement concentrating on developing rural Korea. Very little industry existed in South Korea at the time and vrtually no efficent manufacturers. The Park Government was criticized at the time for human rights abuses (mild in comparison to what was going on in the North). Articles appeared in the West charging the Park Government as repressive and undemocratic, which was accurate in trms of Western standards. The Government began an economic devlopment program using the one resource South Korea had--cheap labor. This would be the catalyst for the Miracle on the Han. A capitalist democracy developed in the south and a Communist totalitarian state in the north.
After World War II and the partition of Korea into a Soviet and American 'administrative' zones, the Soviets had the partially industrialized north and the Americans the agricultural south. The economy of South Korea was basically agricultural and based on inefficent, traditional methods. The Japanese had made no effort to industrialize the south, primarily because of the lack of natural resources there. As repressive as the Japanese were, one policy they did pursue was to build a public education system. So both Koreas had that institutional strength to build on. This was also the situation in Taiwan. Much of the land in both South and North Korea was owned by the Japanese and Yangban class. Both Koreas initiated a land reform. Much of ghe land was owned by Japanese interests or the Yangban class. The North Korean land reform was draconian with land owners being shot and despite early promises, the land eventually became owned by the Government in a priocess of colectivization. The United States and South Koreans carried out a land reform that continued private ownership (1945-50). They confiscated and redistributed all land held by the Japanese interests (the colonial government, Japanese companies, and Japanese colonists). The South Korean government land reform reform required large landholders to divest most of their holdings. The result was a new class of independent, private holding family farmers was created. This was the situation when North Korea invaded South Korea (1950). Korea's infrastruture was badly damaged as well as 2.5 million civilin killed and wounded, about two-thirds in North Korea. The United States began repairing the infrastructture destroyed as part of the war effiort, incliding, ports, bridges, rail lines, and roads. By the end of the War, some of the infrastructure was modern and in better shape than before the War. The economy, however was in shables and the country was heavily dependant heavily on foreign aid. The military seized control of the Government (1961). The military would rule Korea for a quarter of a century. It was autocratic, but in truth so was the Rhee suposedly democratic government. At time the military was openly repressive, but was pragmatic and flexible in its commitment to economic development. And unlike military regimes in other areas and the Rhee Government, it decided on capitalist policies that were not popular in most of the developing world. The result was that South Korea became one of the Asian Tigers. At first obscured by the Japanese Economic Mirale, the Miracle on the Han tranbsfiormed South Korea. For three decades the the South Korean economy grew at an average annual rate of nearly 10 percent annually while the North Korean economy stagnated and then plumeted. Agricultural productivity inncewased in the South, but the n=big change was that South Korea rapidly was trandformed from a backward agricultural economy to an effecicent industrial powerhouse with a skilled workfirce. Per capita income increased more than a hundredfold. Not only did Korea develop heavy indudtry, but a very advanced elrctronics and high tech sectors. The highly leveraged economy was hurt by the Asian market melt-down leafing to a $57 billion IMF bailout (1997). It was the largest IMF rescue program. The country also iniated a domestic program, reforming the chaebŏl and liberalizing the economy. The economy quickly recovered. The economy could not be more different than what the Japanese left in 1945. Rather than an agricultural country with lanbdless peasants, less than 2 percent of the economic output comes from agriculture. Korea is now a middkle-class country with most of the populstion living in cities and enjoying prosperous lives.
The Cold War provided real life tests of economic systems. The central test was that betweem the United States, two superpowers with large. well educated populstions, conintal powers with industrial economies and important africulyural secyors and important nstrural resources. Than there was the compeurion between Communidt Eastern Europe and the capitalist West. And then there was the stiking competition within a divided country, communist East Germany and and capitalist West Germany. But the Communist could make excuses, claiming that World War II damage was most severe in the East, delasing recovery. And they could claim thart the West was more developed thn the East before the War, making recovery easier. As for Germny, theyvcould point out that the Soviet occupation zone was largely agriculture and tht Germn industry was primarily loicated in the Western occupation zones. And although they did not openly say so except secretly to the Soviets, reparation payments to the Soviets damaged the East Germsn economy. So the Asian competitioins were particularly interesting China and Hong Kong Taiwan and North and South Korea. The huge differences between China and Hong Kong Korea make commpisons diffiucult. North and South Korea are a different matter. And here unlike East and West Germany, in the was Communhist North Korea that had been far more affluent abd industrislized. The South before World War II had been the poor agricultural section of the country. As a result, unlike East Germany, the Communists have no excuse for economic failure. North Korea was not only the most advanced part of Korea, but was not as danaged as South Korea by the War.
Sources
Cha, Myung Soo. Yeungnam University. "The economic history of Korea," EH.net, undated, retrieved August 22, 2014.
